Schedule J - Accumulation Distribution for Certain Complex Trusts

2021

Department of the Treasury
Internal Revenue Service

Instructions for Form 1041
and Schedules A, B, G, J,
and K-1
U.S. Income Tax Return for Estates and Trusts
Section references are to the Internal Revenue
Code unless otherwise noted.

Contents
What's New . . . . . . . . . . . . . .
Reminders . . . . . . . . . . . . . . .
Photographs of Missing Children
Unresolved Tax Issues . . . . . . .
How To Get Forms and
Publications . . . . . . . . . . .
General Instructions . . . . . . . . .
Purpose of Form . . . . . . . . . . .
Income Taxation of Trusts and
Decedents' Estates . . . . . .
Abusive Trust Arrangements . . .
Definitions . . . . . . . . . . . . . . .
Who Must File . . . . . . . . . . . .
Electronic Filing . . . . . . . . . . .
When To File . . . . . . . . . . . . .
Period Covered . . . . . . . . . . .
Where To File . . . . . . . . . . . . .
Who Must Sign . . . . . . . . . . . .
Accounting Methods . . . . . . . .
Accounting Periods . . . . . . . . .
Rounding Off to Whole Dollars . .
Estimated Tax . . . . . . . . . . . .
Interest and Penalties . . . . . . . .
Other Forms That May Be
Required . . . . . . . . . . . . .
Additional Information . . . . . . .
Assembly and Attachments . . . .
Special Reporting Instructions . .
Specific Instructions . . . . . . . . .
Name of Estate or Trust . . . . . .
Name and Title of Fiduciary . . . .
Address . . . . . . . . . . . . . . . .
A. Type of Entity . . . . . . . . . . .
B. Number of Schedules K-1
Attached . . . . . . . . . . . . .
C. Employer Identification
Number . . . . . . . . . . . . . .
D. Date Entity Created . . . . . . .
E. Nonexempt Charitable and
Split-Interest Trusts . . . . . .
F. Initial Return, Amended Return,
etc. . . . . . . . . . . . . . . . .
G. Section 645 Election . . . . . .
Income . . . . . . . . . . . . . . . . .
Deductions . . . . . . . . . . . . . .
Limitations on Deductions . . . . .
Tax and Payments . . . . . . . . . .
Schedule A—Charitable
Deduction . . . . . . . . . . . .

Jan 12, 2022

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Contents

Page

Schedule B—Income Distribution
Deduction . . . . . . . . . . . .
Schedule G—Tax Computation
and Payments . . . . . . . . .
Net Investment Income Tax . . . .
Other Information . . . . . . . . . .
Schedule J (Form 1041) —
Accumulation Distribution for
Certain Complex Trusts . . .
Schedule K-1 (Form 1041)—
Beneficiary's Share of
Income, Deductions, Credits,
etc. . . . . . . . . . . . . . . . .
Index . . . . . . . . . . . . . . . . . .

. . . 29

claim an exemption of up to $4,300.
This amount is not subject to phaseout.

Future Developments

Net operating loss (NOL) carryback.
Generally, an NOL arising in a tax year
beginning in 2021 or later may not be
carried back and instead must be
carried forward indefinitely. However,
farming losses arising in tax years
beginning in 2021 or later may be
carried back 2 years and carried
forward indefinitely.
For special rules for NOLs arising in
2018, 2019 or 2020, see Pub. 536, Net
Operating Losses (NOLs) for
Individuals, Estates, and Trusts, for
more information.

What's New

Section 965. Section 965(a) inclusion
amounts are not applicable for tax year
2021 and later years. However, section
965 may still apply to certain estates
and trusts (including the S portion of
ESBTs) where a section 965(h) or
section 965(i) election has been made.

. . . 30
. . . 34
. . . 35
. . . 37

. . . 39
. . . 51

For the latest information about
developments related to Form 1041 and
Schedules A, B, G, J, K-1 and its
instructions, such as legislation enacted
after they were published, go to
IRS.gov/Form1041.

Due date of return. Calendar year
estates and trusts must file Form 1041
by April 18, 2022. The due date is April
18, instead of April 15, because of the
Emancipation Day holiday in the District
of Columbia – even if you don’t live in
the District of Columbia. If you live in
Maine or Massachusetts, you have until
April 19, 2022. That is because of the
Patriots' Day holiday in those states.
Capital gains and qualified dividends. For tax year 2021, the 20%
maximum capital gains rate applies to
estates and trusts with income above
$13,250. The 0% and 15% rates apply
to certain threshold amounts. The 0%
rate applies to amounts up to $2,700.
The 15% rate applies to amounts over
$2,700 and up to $13,250.
Bankruptcy estate filing threshold.
For tax year 2021, the requirement to
file a return for a bankruptcy estate
applies only if gross income is at least
$12,550.
Qualified disability trust. For tax year
2021, a qualified disability trust can
Cat. No. 11372D

Section 1061 reporting. Section 1061
recharacterizes certain long-term capital
gains of applicable partnership interests
held by an estate or trust as short-term
capital gains. See Section 1061
Reporting Guidance FAQs.
Qualified sick and family leave credits extended. These credits have been
extended for qualified leave wages paid
for leave taken after March 31, 2021,
and before October 1, 2021.
Employee retention credit. Recent
legislation modified the applicability of
the employee retention credit. The
credit now applies to qualified wages
paid before October 1, 2021 (or, in the
case of wages paid by an eligible
employer which is a recovery startup
business, before January 1, 2022). For
more information, see Form 941 and its
instructions.
Forgiveness of Paycheck Protection
Program (PPP) Loans. Trusts and
estates report certain information
related to PPP loans. Rev. Proc.
2021-48 permits trusts and estates to
treat tax-exempt income resulting from

the forgiveness of a PPP loan as
received or accrued: (1) as, and to the
extent that, eligible expenses are paid
or incurred; (2) when the trust or estate
applies for forgiveness of the PPP loan;
or (3) when forgiveness of the PPP loan
is granted. See the instructions for
Other Information, Question 1, and
Schedule K-1, Box 14—Other
Information for PPP reporting
instructions. For additional details about
the timing of tax-exempt income related
to forgiven PPP loans, see Rev. Proc.
2021-48, 2021-49 I.R.B. 835

Reminders

• Review a copy of the will or trust
instrument, including any amendments
or codicils, before preparing an estate's
or trust's return.
• We encourage you to use Form
1041-V, Payment Voucher, to
accompany your payment of a balance
of tax due on Form 1041, particularly if
your payment is made by check or
money order.
Excess deductions on termination.
Under Final Regulations - TD9918, each
excess deduction on termination of an
estate or trust retains its separate
character as an amount allowed in
arriving at adjusted gross income, a
non-miscellaneous itemized deduction,
or a miscellaneous itemized deduction.
Box 11, code A, was revised to read
Excess deductions–Section 67(e)
expenses and a new Box 11, code B,
Excess deductions–Non-miscellaneous
itemized deductions, was added.
See Box 11, Code A Excess
Deductions on Termination - Section
67(e) Expenses and Box 11, Code B
Excess Deductions on Termination Non-Miscellaneous Itemized
Deductions later, for more information.
Business interest deduction. Every
taxpayer who deducts business interest
is required to file Form 8990, Limitation
on Business Interest Expense Under
Section 163(j), unless an exception for
filing is met. For more information, see
Form 8990 and its instructions.
Line 20–Qualified Business Income
Deduction. Line 20 is used to report
the qualified business income deduction
attributable to the entity’s share of
qualified items. Pass-through entity
reporting statements are included in
these instructions to assist the trust or
estate in reporting the proper qualified
business income items and other
information to its beneficiaries. These
statements, or substantially similar
statements, must be attached to each

beneficiary’s Schedule K-1 reporting
their allocable share of each item and
other information as applicable.
ESBT Worksheet. An Electing Small
Business Trust (ESBT) Tax Worksheet
is in the instructions to calculate the
ESBT tax.
Qualified Opportunity Investment. If
you held a qualified investment in a
qualified opportunity fund (QOF) at any
time during the year, you must file your
return with Form 8997, Initial and
Annual Statement of Qualified
Opportunity Fund Investments, attached
to your return. For more information, see
Form 8997 and its instructions.
Extension of time to file. The
extension of time to file an estate (other
than a bankruptcy estate) or trust return
is 51/2 months.
Item A. Type of Entity. On page 1 of
Form 1041, Item A, taxpayers should
select more than one box, when
appropriate, to reflect the type of entity.
Item F. Net operating loss (NOL) carryback. If an amended return is filed for
an NOL carryback, check the box in
Item F, Net operating loss carryback.
See Amended Return, later, for
complete information.

Photographs of Missing
Children

The Internal Revenue Service is a proud
partner with the National Center for
Missing & Exploited Children®
(NCMEC). Photographs of missing
children selected by the Center may
appear in instructions on pages that
would otherwise be blank. You can help
bring these children home by looking at
the photographs and calling
1-800-THE-LOST (1-800-843-5678) if
you recognize a child.

Unresolved Tax Issues

If you have attempted to deal with an
IRS problem unsuccessfully, you should
contact the Taxpayer Advocate Service
(TAS). The Taxpayer Advocate
independently represents the estate's or
trust's interests and concerns within the
IRS by protecting its rights and resolving
problems that have not been fixed
through normal channels.
While Taxpayer Advocates can't
change the tax law or make a technical
tax decision, they can clear up problems
that resulted from previous contacts and
ensure that the estate's or trust's case is
given a complete and impartial review.

Item G. Section 645 election. If the
estate has made a section 645 election
the executor must check Item G and
provide the taxpayer identification
number (TIN) of the electing trust with
the highest total asset value in the box
provided.
The executor must also attach a
statement to Form 1041 providing the
following information for each electing
trust (including the electing trust
provided in Item G): (a) the name of the
electing trust, (b) the TIN of the electing
trust, and (c) the name and address of
the trustee of the electing trust.

The estate's or trust's assigned
personal advocate will listen to its point
of view and will work with the estate or
trust to address its concerns. The estate
or trust can expect the advocate to
provide:
• An impartial and independent look at
your problem,
• Timely acknowledgment,
• The name and phone number of the
individual assigned to its case,
• Updates on progress,
• Timeframes for action,
• Speedy resolution, and
• Courteous service.

Form 1041 e-filing. When e-filing
Form 1041 use either Form 8453-FE,
U.S. Estate or Trust Declaration for an
IRS e-efile Return, or Form 8879-F, IRS
e-file Signature Authorization for Form
1041.
Note. Form 8879-F can only be
associated with a single Form 1041.
Form 8879-F can no longer be used
with multiple Forms 1041.
For more information about e-filing
returns through MeF, see Pub. 4164,
Modernized e-File (MeF) Guide for
Software Developers and Transmitters.

When contacting the Taxpayer
Advocate, you should provide the
following information.
• The estate's or trust's name, address,
and employer identification number
(EIN).
• The name and telephone number of
an authorized contact person and the
hours he or she can be reached.
• The type of tax return and year(s)
involved.
• A detailed description of the problem.
• Previous attempts to solve the
problem and the office that had been
contacted.
• A description of the hardship the
estate or trust is facing and supporting
documentation (if applicable).

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Instructions for Form 1041 (2021)

You can contact a Taxpayer
Advocate as follows.
• Call the Taxpayer Advocate's toll-free
number: 877-777-4778.
• Call, write, or fax the Taxpayer
Advocate office in its area (see Pub.
1546, Taxpayer Advocate Service, Your
Voice At The IRS, for addresses and
phone numbers).
• TTY/TDD help is available by calling
800-829-4059.
• Visit the website at IRS.gov/
advocate.

How To Get Forms and
Publications
Internet. You can access the
IRS website 24 hours a day, 7
days a week, at IRS.gov to:

• Download forms, including talking tax
forms, instructions, and publications;
• Order IRS products;
• Use the online Internal Revenue
Code, regulations, and other official
guidance;
• Research your tax questions;
• Search publications by topic or
keyword;
• Apply for an Employer Identification
Number (EIN); and
• Sign up to receive local and national
tax news by email.

General Instructions
Purpose of Form

The fiduciary of a domestic decedent's
estate, trust, or bankruptcy estate uses
Form 1041 to report:
• The income, deductions, gains,
losses, etc. of the estate or trust;
• The income that is either
accumulated or held for future
distribution or distributed currently to the
beneficiaries;
• Any income tax liability of the estate
or trust;
• Employment taxes on wages paid to
household employees; and
• Net Investment Income Tax. See
Schedule G, Part I, line 5, and the
Instructions for Form 8960.

Income Taxation of Trusts
and Decedents' Estates

A trust or a decedent's estate is a
separate legal entity for federal tax
purposes. A decedent's estate comes
into existence at the time of death of an
individual. A trust may be created during
an individual's life (inter vivos) or at the
time of his or her death under a will
(testamentary). If the trust instrument

Instructions for Form 1041 (2021)

contains certain provisions, then the
person creating the trust (the grantor) is
treated as the owner of the trust's
assets. Such a trust is a grantor type
trust. See Grantor Type Trusts, later,
under Special Reporting Instructions.
A trust or decedent's estate figures
its gross income in much the same
manner as an individual. Most
deductions and credits allowed to
individuals are also allowed to estates
and trusts. However, there is one major
distinction. A trust or decedent's estate
is allowed an income distribution
deduction for distributions to
beneficiaries. To figure this deduction,
the fiduciary must complete Schedule B.
The income distribution deduction
determines the amount of any
distributions taxed to the beneficiaries.
For this reason, a trust or decedent's
estate sometimes is referred to as a
“pass-through” entity. The beneficiary,
and not the trust or decedent's estate,
pays income tax on his or her
distributive share of income.
Schedule K-1 (Form 1041) is used to
notify the beneficiaries of the amounts
to be included on their income tax
returns.
Before preparing Form 1041, the
fiduciary must figure the accounting
income of the estate or trust under the
will or trust instrument and applicable
local law to determine the amount, if
any, of income that is required to be
distributed, because the income
distribution deduction is based, in part,
on that amount.

Abusive Trust
Arrangements

Certain trust arrangements claim to
reduce or eliminate federal taxes in
ways that are not permitted under the
law. Abusive trust arrangements
typically are promoted by the promise of
tax benefits with no meaningful change
in the taxpayer's control over or benefit
from the taxpayer's income or assets.
The promised benefits may include
reduction or elimination of income
subject to tax; deductions for personal
expenses paid by the trust; depreciation
deductions of an owner's personal
residence and furnishings; a stepped-up
basis for property transferred to the
trust; the reduction or elimination of
self-employment taxes; and the
reduction or elimination of gift and
estate taxes. These promised benefits
are inconsistent with the tax rules
applicable to trust arrangements.
Abusive trust arrangements often use
trusts to hide the true ownership of
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assets and income or to disguise the
substance of transactions. These
arrangements frequently involve more
than one trust, each holding different
assets of the taxpayer (for example, the
taxpayer's business, business
equipment, home, automobile, etc.).
Some trusts may hold interests in other
trusts, purport to involve charities, or are
foreign trusts. Funds may flow from one
trust to another trust by way of rental
agreements, fees for services, purchase
agreements, and distributions.
Some of the abusive trust
arrangements that have been identified
include unincorporated business trusts
(or organizations), equipment or service
trusts, family residence trusts, charitable
trusts, and final trusts. In each of these
trusts, the original owner of the assets
nominally subject to the trust effectively
retains the authority to cause financial
benefits of the trust to be directly or
indirectly returned or made available to
the owner. For example, the trustee may
be the promoter, a relative, or a friend of
the owner who simply carries out the
directions of the owner whether or not
permitted by the terms of the trust.
When trusts are used for legitimate
business, family, or estate planning
purposes, either the trust, the
beneficiary, or the transferor of assets to
the trust will pay the tax on income
generated by the trust property. Trusts
can't be used to transform a taxpayer's
personal, living, or educational
expenses into deductible items, and
can't seek to avoid tax liability by
ignoring either the true ownership of
income and assets or the true
substance of transactions. Therefore,
the tax results promised by the
promoters of abusive trust
arrangements are not allowable under
the law, and the participants in and
promoters of these arrangements may
be subject to civil or criminal penalties in
appropriate cases.
For more details, including the legal
principles that control the proper tax
treatment of these abusive trust
arrangements, see Notice 97-24,
1997-1 C.B. 409.
For additional information about
abusive tax arrangements, visit the IRS
website at IRS.gov and type “Abusive
Trusts” in the search box.

Definitions
Adjusted gross income (AGI).
Compute the AGI of an estate or
non-grantor trust by subtracting the

following from total income on line 9 of
page 1:
1. The administration costs of the
estate or trust (the total of lines 12, 14,
and 15a to the extent they are costs
incurred in the administration of the
estate or trust) that wouldn't have been
incurred if the property were not held by
the estate or trust;
2. The income distribution
deduction (line 18);
3. The amount of the exemption
(line 21);
4. The net operating loss deduction
(NOLD) claimed on line 15b.
Electing small business trust
(ESBT). Compute the AGI of the S
portion of an ESBT in the same manner
as an individual taxpayer, except that
administration costs allocable to the S
portion (to the extent they are costs
incurred in the administration of the trust
that wouldn't have been incurred if the
property were not held by the estate or
trust) shall be deducted in arriving at
AGI.
Beneficiary. A beneficiary includes an
heir, a legatee, or a devisee.
Decedent's estate. The decedent's
estate is an entity that is formed at the
time of an individual's death and
generally is charged with gathering the
decedent's assets, paying the
decedent's debts and expenses, and
distributing the remaining assets.
Generally, the estate consists of all the
property, real or personal, tangible or
intangible, wherever situated, that the
decedent owned an interest in at death.
Distributable net income (DNI). The
income distribution deduction allowable
to estates and trusts for amounts paid,
credited, or required to be distributed to
beneficiaries is limited to DNI. This
amount, which is figured on Schedule B,
line 7, is also used to determine how
much of an amount paid, credited, or
required to be distributed to a
beneficiary will be includible in his or her
gross income.
Income in respect of a decedent.
When completing Form 1041, you must
take into account any items that are
income in respect of a decedent (IRD).
In general, IRD is income that a
decedent was entitled to receive but
that was not properly includible in the
decedent's final income tax return under
the decedent's method of accounting.
IRD includes:

• All accrued income of a decedent
who reported his or her income on the
cash method of accounting,
• Income accrued solely because of
the decedent's death in the case of a
decedent who reported his or her
income on the accrual method of
accounting, and
• Income to which the decedent had a
contingent claim at the time of his or her
death.
Some examples of IRD for a
decedent who kept his or her books on
the cash method are:
• Deferred salary payments that are
payable to the decedent's estate,
• Uncollected interest on U.S. savings
bonds,
• Proceeds from the completed sale of
farm produce, and
• The portion of a lump-sum
distribution to the beneficiary of a
decedent's IRA that equals the balance
in the IRA at the time of the owner's
death. This includes unrealized
appreciation and income accrued to that
date, less the aggregate amount of the
owner's nondeductible contributions to
the IRA. Such amounts are included in
the beneficiary's gross income in the tax
year that the distribution is received.
The IRD has the same character it
would have had if the decedent had
lived and received such amount.
Deductions and credits in respect
of a decedent. The following
deductions and credits, when paid by
the decedent's estate, are allowed on
Form 1041 even though they were not
allowable on the decedent's final
income tax return.
• Business expenses deductible under
section 162.
• Interest deductible under section 163.
• Taxes deductible under section 164.
• Percentage depletion allowed under
section 611.
• Foreign tax credit.
For more information on IRD, see
section 691 and Pub. 559, Survivors,
Executors, and Administrators.
Income required to be distributed
currently. Income required to be
distributed currently is income that is
required under the terms of the
governing instrument and applicable
local law to be distributed in the year it is
received. The fiduciary must be under a
duty to distribute the income currently,
even if the actual distribution is not
made until after the close of the trust's
tax year. See Regulations section
1.651(a)-2.

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Fiduciary. A fiduciary is a trustee of a
trust, or an executor, executrix,
administrator, administratrix, personal
representative, or person in possession
of property of a decedent's estate.
Note. Any reference in these
instructions to “you” means the fiduciary
of the estate or trust.
Trust. A trust is an arrangement
created either by a will or by an inter
vivos declaration by which trustees take
title to property for the purpose of
protecting or conserving it for the
beneficiaries under the ordinary rules
applied in chancery or probate courts.
Revocable living trust. A revocable
living trust is an arrangement created by
a written agreement or declaration
during the life of an individual and can
be changed or ended at any time during
the individual's life. A revocable living
trust is generally created to manage and
distribute property. Many people use
this type of trust instead of (or in
addition to) a will.
Because this type of trust is
revocable, it is treated as a grantor type
trust for tax purposes. See Grantor Type
Trusts under Special Reporting
Instructions, later, for special filing
instructions that apply to grantor trusts.
Be sure to read Optional Filing

TIP Methods for Certain Grantor

Type Trusts. Generally, most
people that have revocable living trusts
will be able to use Optional Method 1.
This method is the easiest and least
burdensome way to meet your
obligations.

Who Must File
Decedent's Estate

The fiduciary (or one of the joint
fiduciaries) must file Form 1041 for a
domestic estate that has:
1. Gross income for the tax year of
$600 or more, or
2. A beneficiary who is a
nonresident alien.
3. If you held a qualified investment
in a qualified opportunity fund (QOF) at
any time during the year, you must file
your return with Form 8997 attached.
See the Form 8997 instructions.
An estate is a domestic estate if it
isn't a foreign estate. A foreign estate is
one the income of which is from sources
outside the United States that isn't
effectively connected with the conduct
of a U.S. trade or business and isn't
includible in gross income. If you are the
Instructions for Form 1041 (2021)

fiduciary of a foreign estate, file Form
1040-NR, U.S. Nonresident Alien
Income Tax Return, instead of Form
1041.

Trust

The fiduciary (or one of the joint
fiduciaries) must file Form 1041 for a
domestic trust taxable under section
641 that has:
1. Any taxable income for the tax
year,
2. Gross income of $600 or more
(regardless of taxable income), or
3. A beneficiary who is a
nonresident alien.
4. If you held a qualified investment
in a qualified opportunity fund (QOF) at
any time during the year, you must file
your return with Form 8997 attached.
See the Form 8997 instructions.
Two or more trusts are treated as
one trust if the trusts have substantially
the same grantor(s) and substantially
the same primary beneficiary(ies) and a
principal purpose of such trusts is
avoidance of tax. This provision applies
only to that portion of the trust that is
attributable to contributions to corpus
made after March 1, 1984.
A trust is a domestic trust if:

• A U.S. court is able to exercise

primary supervision over the
administration of the trust (court test),
and
• One or more U.S. persons have the
authority to control all substantial
decisions of the trust (control test).
See Regulations section 301.7701-7
for more information on the court and
control tests.
Also treated as a domestic trust is a
trust (other than a trust treated as wholly
owned by the grantor) that:
• Was in existence on August 20, 1996,
• Was treated as a domestic trust on
August 19, 1996, and
• Elected to continue to be treated as a
domestic trust.
A trust that isn't a domestic trust is
treated as a foreign trust. If you are the
trustee of a foreign trust, file Form
1040-NR instead of Form 1041. Also, a
foreign trust with a U.S. owner generally
must file Form 3520-A, Annual
Information Return of Foreign Trust With
a U.S. Owner.
If a domestic trust becomes a foreign
trust, it is treated under section 684 as
having transferred all of its assets to a
foreign trust, except to the extent a
grantor or another person is treated as
Instructions for Form 1041 (2021)

the owner of the trust when the trust
becomes a foreign trust.

Grantor Type Trusts

If all or any portion of a trust is a grantor
type trust, then that trust or portion of a
trust must follow the special reporting
requirements discussed later, under
Special Reporting Instructions. See
Grantor Type Trust under Specific
Instructions for more details on what
makes a trust a grantor type trust.
Note. A trust may be part grantor trust
and part “other” type of trust, for
example, simple or complex, or electing
small business trust (ESBT).

Qualified subchapter S trusts
(QSSTs). QSSTs must follow the
special reporting requirements for these
trusts discussed later, under Special
Reporting Instructions.

Special Rule for Certain Revocable
Trusts
Section 645 provides that if both the
executor (if any) of an estate (the
related estate) and the trustee of a
qualified revocable trust (QRT) elect the
treatment in section 645, the trust must
be treated and taxed as part of the
related estate during the election period.
This election may be made by a QRT
even if no executor is appointed for the
related estate.
In general, Form 8855, Election To
Treat a Qualified Revocable Trust as
Part of an Estate, must be filed by the
due date for Form 1041 for the first tax
year of the related estate. This applies
even if the combined related estate and
electing trust don't have sufficient
income to be required to file Form 1041.
However, if the estate is granted an
extension of time to file Form 1041 for
its first tax year, the due date for Form
8855 is the extended due date.
Once made, the election is
irrevocable.
Qualified revocable trusts (QRT). In
general, a QRT is any trust (or part of a
trust) that, on the day the decedent
died, was treated as owned by the
decedent because the decedent held
the power to revoke the trust as
described in section 676. An electing
trust is a QRT for which a section 645
election has been made.
Election period. The election period is
the period of time during which an
electing trust is treated as part of its
related estate.
-5-

The election period begins on the
date of the decedent's death and
terminates on the earlier of:
• The day on which the electing trust
and related estate, if any, distribute all of
their assets, or
• The day before the applicable date.
To determine the applicable date, first
determine whether a Form 706, United
States Estate (and Generation-Skipping
Transfer) Tax Return, is required to be
filed as a result of the decedent's death.
If no Form 706 is required to be filed, the
applicable date is 2 years after the date
of the decedent's death. If Form 706 is
required, the applicable date is the later
of 2 years after the date of the
decedent's death or 6 months after the
final determination of liability for estate
tax. For additional information, see
Regulations section 1.645-1(f).
Taxpayer identification number
(TIN). All QRTs must obtain a new TIN
following the death of the decedent
whether or not a section 645 election is
made. (Use Form W-9, Request for
Taxpayer Identification Number and
Certification, to notify payers of the new
TIN.)
An electing trust that continues after
the termination of the election period
doesn't need to obtain a new TIN
following the termination unless:
• An executor was appointed and
agreed to the election after the electing
trust made a valid section 645 election,
and the electing trust filed a return as an
estate under the trust's TIN, or
• No executor was appointed and the
QRT was the filing trust (as explained
later).
A related estate that continues after
the termination of the election period
doesn't need to obtain a new TIN.
For more information about TINs,
including trusts with multiple owners,
see Regulations sections 1.645-1 and
301.6109-1(a).
General procedures for completing
Form 1041 during the election period.
If there is an executor. The
following rules apply to filing Form 1041
while the election is in effect.
• The executor of the related estate is
responsible for filing Form 1041 for the
estate and all electing trusts. The return
is filed under the name and TIN of the
related estate. Be sure to check the
Decedent's estate box at the top of
Form 1041 and Item G if the estate has
made a section 645 election. The
executor continues to file Form 1041
during the election period even if the

estate distributes all of its assets before
the end of the election period.
• The Form 1041 includes all items of
income, deduction, and credit for the
estate and all electing trusts.
• For Item G, the executor must provide
the TIN of the electing trust with the
highest total asset value.
• The executor must attach a statement
to Form 1041 providing the following
information for each electing trust
(including the electing trust provided in
Item G): (a) the name of the electing
trust, (b) the TIN of the electing trust,
and (c) the name and address of the
trustee of the electing trust.
• The related estate and the electing
trust are treated as separate shares for
purposes of computing DNI and
applying distribution provisions. Also,
each of those shares can contain two or
more separate shares. For more
information, see Separate share rule,
later, and Regulations section
1.645-1(e)(2)(iii).
• The executor is responsible for
insuring that the estate's share of the
combined tax obligation is paid.
For additional information, including
treatment of transfers between shares
and charitable contribution deductions,
see Regulations section 1.645-1(e).
If there isn't an executor. If no
executor has been appointed for the
related estate, the trustee of the electing
trust files Form 1041 as if it was an
estate. File using the TIN that the QRT
obtained after the death of the
decedent. The trustee can choose a
fiscal year as the trust's tax year during
the election period. Be sure to check the
Decedent's estate box at the top of
Form 1041 and Item G if the filing trust
has made a section 645 election. For
Item G, the filing trustee must provide
the TIN of the electing trust with the
highest total asset value. The electing
trust is entitled to a single $600 personal
exemption on returns filed for the
election period.
If there is more than one electing
trust, the trusts must appoint one trustee
as the filing trustee. Form 1041 is filed
under the name and TIN of the filing
trustee's trust. A statement providing the
same information about the electing
trusts (except the filing trust) that is
listed under, If there is an executor,
above must be attached to these Forms
1041. All electing trusts must choose
the same tax year.
If there is more than one electing
trust, the filing trustee is responsible for
ensuring that the filing trust's share of
the combined tax liability is paid.

For additional information on filing
requirements when there is no executor,
including application of the separate
share rule, see Regulations section
1.645-1(e). For information on the
requirements when an executor is
appointed after an election is made and
the executor doesn't agree to the
election, see below.
Responsibilities of the trustee
when there is an executor (or there
isn't an executor and the trustee
isn't the filing trustee). When there is
an executor (or there isn't an executor
and the trustee isn't the filing trustee),
the trustee of an electing trust is
responsible for the following during the
election period.
• To timely provide the executor with all
the trust information necessary to allow
the executor to file a complete,
accurate, and timely Form 1041.
• To ensure that the electing trust's
share of the combined tax liability is
paid.
The trustee does not file a Form 1041
during the election period (except for a
final return if the trust terminates during
the election period as explained later).
Procedure for completing Form 1041
for the year in which the election terminates.
If there is an executor. If there is an
executor, the Form 1041 filed under the
name and TIN of the related estate for
the tax year in which the election
terminates includes (a) the items of
income, deduction, and credit for the
related estate for its entire tax year, and
(b) the income, deductions, and credits
for the electing trust for the period that
ends with the last day of the election
period. If the estate won't continue after
the close of the tax year, indicate that
this Form 1041 is a final return.
At the end of the last day of the
election period, the combined entity is
deemed to distribute the share
comprising the electing trust to a new
trust. All items of income, including net
capital gains, that are attributable to the
share comprising the electing trust are
included in the calculation of DNI of the
electing trust and treated as distributed.
The distribution rules of sections 661
and 662 apply to this deemed
distribution. The combined entity is
entitled to an income distribution
deduction for this deemed distribution,
and the "new" trust must include its
share of the distribution in its income.
See Regulations sections 1.645-1(e)(2)
(iii) and 1.645-1(h) for more information.

-6-

If the electing trust continues in
existence after the termination of the
election period, the trustee must file
Form 1041 under the name and TIN of
the trust, using the calendar year as its
accounting period, if it is otherwise
required to file.
If there isn't an executor. If there
isn't an executor, the following rules
apply to filing Form 1041 for the tax year
in which the election period ends.
• The tax year of the electing trust
closes on the last day of the election
period, and the Form 1041 filed for that
tax year includes all items of income,
deduction, and credit for the electing
trust for the period beginning with the
first day of the tax year and ending with
the last day of the election period.
• The deemed distribution rules
discussed above apply.
• Check the box to indicate that this
Form 1041 is a final return.
• If the filing trust continues after the
termination of the election period, the
trustee must obtain a new TIN. If the
trust meets the filing requirements, the
trustee must file a Form 1041 under the
new TIN for the period beginning with
the day after the close of the election
period and, in general, ending
December 31 of that year.
Responsibilities of the trustee
when there is an executor (or there
isn't an executor and the trustee
isn't the filing trustee). In addition to
the requirements listed above under this
same heading, the trustee is
responsible for the following.
• If the trust will not continue after the
close of the election period, the trustee
must file a Form 1041 under the name
and TIN of the trust. Complete the entity
information and items A, C, D, and F.
Indicate in item F that this is a final
return. Don't report any items of income,
deduction, or credit.
• If the trust will continue after the close
of the election period, the trustee must
file a Form 1041 for the trust for the tax
year beginning the day after the close of
the election period and, in general,
ending December 31 of that year. Use
the TIN obtained after the decedent's
death. Follow the general rules for
completing the return.
Special filing instructions.
When the election isn't made by
the due date of the QRT's Form
1041. If the section 645 election hasn't
been made by the time the QRT's first
income tax return would be due for the
tax year beginning with the decedent's
death, but the trustee and executor (if
Instructions for Form 1041 (2021)

any) have decided to make a section
645 election, then the QRT isn't required
to file a Form 1041 for the short tax year
beginning with the decedent's death
and ending on December 31 of that
year. However, if a valid election isn't
subsequently made, the QRT may be
subject to penalties and interest for
failure to file and failure to pay.
If the QRT files a Form 1041 for this
short period, and a valid section 645
election is subsequently made, then the
trustee must file an amended Form
1041 for the electing trust, excluding all
items of income, deduction, and credit
of the electing trust. These amounts are
then included on the first Form 1041
filed by the executor for the related
estate (or the filing trustee for the
electing trust filing as an estate).
Later appointed executor. If an
executor for the related estate isn't
appointed until after the trustee has
made a valid section 645 election, the
executor must agree to the trustee's
election and they must file a revised
Form 8855 within 90 days of the
appointment of the executor. If the
executor doesn't agree to the election,
the election terminates as of the date of
appointment of the executor.
If the executor agrees to the election,
the trustee must amend any Form 1041
filed under the name and TIN of the
electing trust for the period beginning
with the decedent's death. The
amended returns are still filed under the
name and TIN of the electing trust, and
they must include the items of income,
deduction, and credit for the related
estate for the periods covered by the
returns. Also, attach a statement to the
amended Forms 1041 identifying the
name and TIN of the related estate, and
the name and address of the executor.
Check the Final return box on the
amended return for the tax year that
ends with the appointment of the
executor. Except for this amended
return, all returns filed for the combined
entity after the appointment of the
executor must be filed under the name
and TIN of the related estate.
If the election terminates as the result
of a later appointed executor, the
executor of the related estate must file
Forms 1041 under the name and TIN of
the related estate for all tax years of the
related estate beginning with the
decedent's death. The electing trust's
election period and tax year terminate
the day before the appointment of the
executor. The trustee isn't required to
amend any of the returns filed by the
electing trust for the period prior to the
Instructions for Form 1041 (2021)

appointment of the executor. The trust
must file a final Form 1041 following the
instructions above for completing Form
1041 in the year in which the election
terminates and there is no executor.
Termination of the trust during
the election period. If an electing
trust terminates during the election
period, the trustee of that trust must file
a final Form 1041 by completing the
entity information (using the trust's EIN),
checking the Final return box, and
signing and dating the form. Don't report
items of income, deduction, and credit.
These items are reported on the related
estate's return.

Alaska Native Settlement
Trusts

The trustee of an Alaska Native
Settlement Trust may elect the special
tax treatment for the trust and its
beneficiaries provided for in section
646. The election must be made by the
due date (including extensions) for filing
the trust's tax return for its first tax year
ending after June 7, 2001. Don't use
Form 1041. Use Form 1041-N, U.S.
Income Tax Return for Electing Alaska
Native Settlement Trusts, to make the
election. Additionally, Form 1041-N is
the trust's income tax return and
satisfies the section 6039H information
reporting requirement for the trust.

Bankruptcy Estate

The bankruptcy trustee or debtor-inpossession must file Form 1041 for the
estate of an individual involved in
bankruptcy proceedings under
chapter 7 or 11 of title 11 of the United
States Code if the estate has gross
income for the tax year of $12,550 or
more. See Bankruptcy Estates, later, for
details.

Charitable Remainder Trusts

A section 664 charitable remainder trust
(CRT) doesn’t file Form 1041. Instead, a
CRT files Form 5227, Split-Interest Trust
Information Return. If the CRT has any
unrelated business taxable income, it
also must file Form 4720, Return of
Certain Excise Taxes Under Chapters
41 and 42 of the Internal Revenue
Code.

Common Trust Funds

Don't file Form 1041 for a common trust
fund maintained by a bank. Instead, the
fund may use Form 1065, U.S. Return
of Partnership Income, for its return. For
more details, see section 584 and
Regulations section 1.6032-1.

-7-

Electing Small Business Trusts
Electing small business trusts file Form
1041. However, see Electing Small
Business Trusts (ESBTs), later, for a
discussion of the special reporting
requirements for these trusts.

Pooled Income Funds

Pooled income funds file Form 1041.
See Pooled Income Funds, later, for the
special reporting requirements for these
trusts. Additionally, pooled income
funds must file Form 5227, Split-Interest
Trust Information Return.

Qualified Funeral Trusts

Trustees of pre-need funeral trusts who
elect treatment under section 685 file
Form 1041-QFT, U.S. Income Tax
Return for Qualified Funeral Trusts. All
other pre-need funeral trusts, see
Grantor Type Trusts, later, for Form
1041 reporting requirements.

Qualified Settlement Funds

The trustee of a designated or qualified
settlement fund (QSF) generally must
file Form 1120-SF, U.S. Income Tax
Return for Settlement Funds, instead of
Form 1041.
Special election. If a QSF has only
one transferor, the transferor may elect
to treat the QSF as a grantor type trust.
To make the grantor trust election,
the transferor must attach an election
statement to a timely filed Form 1041,
including extensions, that the
administrator files for the QSF for the
tax year in which the settlement fund is
established. If Form 1041 isn't filed
because Optional Method 1 or 2
(described later) was chosen, attach the
election statement to a timely filed
income tax return, including extensions,
of the transferor for the tax year in which
the settlement fund is established.
Election statement. The election
statement may be made separately or, if
filed with Form 1041, on the attachment
described under Grantor Type Trusts,
later. At the top of the election
statement, write “Section 1.468B-1(k)
Election” and include the transferor's:
• Name,
• Address,
• TIN, and
• A statement that he or she will treat
the qualified settlement fund as a
grantor type trust.

Widely Held Fixed Investment
Trust (WHFITs)
Trustees and middlemen of WHFITs
don't file Form 1041. Instead, they
report all items of gross income and

proceeds on the appropriate Form
1099. For the definition of a WHFIT, see
Regulations section 1.671-5(b)(22). A
tax information statement that includes
the information given to the IRS on
Forms 1099, as well as additional
information identified in Regulations
section 1.671-5(e) must be given to trust
interest holders. See the General
Instructions for Certain Information
Returns for more information.

Electronic Filing

Qualified fiduciaries or transmitters may
be able to file Form 1041 and related
schedules electronically. To become an
e-file provider complete the following
steps.
1. Create an IRS e-Services
account.
2. Submit your e-file provider
application online.
3. Pass a suitability check.
The online application process takes
4-6 weeks to complete.
Note. Existing e-file providers must
now use e-Services to make account
updates.
Help is available online at e-services
or through the e-Help Desk at
866-255-0654 (512-416-7750 for
international calls), Monday through
Friday, 6:30 a.m.- 6:00 p.m. (Central
time). Frequently asked questions and
On-line Tutorials are available to answer
questions or to guide users through the
application process.
If you file Form 1041 electronically,
you may sign the return electronically by
using a personal identification number
(PIN). See Form 8879-F, IRS e-file
Signature Authorization for Form 1041,
for details.
Form 8879-F can only be
associated with a single Form
CAUTION 1041. Form 8879-F can't be
used with multiple Forms 1041.

!

Form 1041 may also be e-Filed using
Form 8453-FE, U.S. Estate or Trust
Declaration for an IRS e-file return.
For more information about e-filing
returns through MeF, see Publication
4164, Modernized e-File (MeF) Guide
for Software Developers and
Transmitters.
If Form 1041 is e-filed and there is a
balance due, the fiduciary may
authorize an electronic funds withdrawal
with the return.

Private Delivery Services

You can use certain private delivery
services (PDS) designated by the IRS to
meet the “timely mailing as timely filing/
paying” rule for tax returns and
payments. Go to IRS.gov/PDS for the
current list of designated services.
The PDS can tell you how to get
written proof of the mailing date.
For the IRS mailing address to use if
you’re using PDS, go to IRS.gov/
PDSstreetAddresses.
Private delivery services can't
deliver items to P.O. boxes. You
CAUTION must use the U.S. Postal
Service to mail any item to an IRS P.O.
box address.

!

When To File

For calendar year estates and trusts, file
Form 1041 and Schedule(s) K-1 by
April 18, 2022.
Note. If you live in Maine or
Massachusetts, you have until April 19,
2022. That is because of the Patriots'
Day holiday in those states.
For fiscal year estates and trusts, file
Form 1041 by the 15th day of the 4th
month following the close of the tax
year. For example, an estate that has a
tax year that ends on June 30, 2022,
must file Form 1041 by October 15,
2022. If the due date falls on a Saturday,
Sunday, or legal holiday, file on the next
business day.

Extension of Time To File

If more time is needed to file the estate
or trust return, use Form 7004,
Application for Automatic Extension of
Time To File Certain Business Income
Tax, Information, and Other Returns, to
apply for an automatic 51/2-month
extension of time to file.

Period Covered

File the 2021 return for calendar year
2021 and fiscal years beginning in 2021
and ending in 2022. If the return is for a
fiscal year or a short tax year (less than
12 months), fill in the tax year space at
the top of the form.
The 2021 Form 1041 may also be
used for a tax year beginning in 2022 if:
1. The estate or trust has a tax year
of less than 12 months that begins and
ends in 2022, and
2. The 2022 Form 1041 isn't
available by the time the estate or trust
is required to file its tax return. However,
the estate or trust must show its 2022
tax year on the 2021 Form 1041 and
-8-

incorporate any tax law changes that
are effective for tax years beginning
after 2021.

Who Must Sign
Fiduciary

The fiduciary, or an authorized
representative, must sign Form 1041. If
there are joint fiduciaries, only one is
required to sign the return.
A financial institution that submitted
estimated tax payments for trusts for
which it is the trustee must enter its EIN
in the space provided for the EIN of the
fiduciary. Don't enter the EIN of the
trust. For this purpose, a financial
institution is one that maintains a
Treasury Tax and Loan (TT&L) account.
If you are an attorney or other individual
functioning in a fiduciary capacity, leave
this space blank. Don't enter your
individual social security number (SSN).

Paid Preparer

Generally, anyone who is paid to
prepare a tax return must sign the return
and fill in the other blanks in the “Paid
Preparer Use Only” area of the return.
The person required to sign the
return must:
• Complete the required preparer
information,
• Sign it in the space provided for the
preparer's signature (a facsimile
signature is acceptable), and
• Give you a copy of the return for your
records.
If you, as fiduciary, fill in Form 1041,
leave the “Paid Preparer Use Only”
space blank.
If someone prepares this return and
doesn't charge you, that person should
not sign the return.

Paid Preparer Authorization

If the fiduciary wants to allow the IRS to
discuss the estate's or trust's 2021 tax
return with the paid preparer who signed
it, check the “Yes,” box in the signature
area of the return. This authorization
applies only to the individual whose
signature appears in the Paid Preparer
Use Only area of the estate's or trust's
return. It doesn't apply to the firm, if any,
shown in that section.
If the “Yes,” box is checked, the
fiduciary is authorizing the IRS to call
the paid preparer to answer any
questions that may arise during the
processing of the estate's or trust's
return. The fiduciary is also authorizing
the paid preparer to:
Instructions for Form 1041 (2021)

other than December, you are adopting
a fiscal tax year.

Where To File
For all estates and trusts, including charitable and split-interest trusts (other than
Charitable Remainder Trusts).
THEN use this address if you:
IF you are located in ...

Are not enclosing a check or
money order ...

Connecticut, Delaware,
District of Columbia,
Georgia, Illinois, Indiana,
Kentucky, Maine,
Maryland, Massachusetts,
Michigan, New Hampshire, Department of the Treasury
New Jersey, New York,
Internal Revenue Service
Kansas City, MO 64999–0048
North Carolina, Ohio,
Pennsylvania, Rhode
Island, South Carolina,
Tennessee, Vermont,
Virginia, West Virginia,
Wisconsin
Alabama, Alaska, Arizona,
Arkansas, California,
Colorado, Florida, Hawaii,
Idaho, Iowa, Kansas,
Louisiana, Minnesota,
Mississippi, Missouri,
Montana, Nebraska,
Nevada, New Mexico,
North Dakota, Oklahoma,
Oregon, South Dakota,
Texas, Utah, Washington,
Wyoming

Department of the Treasury
Internal Revenue Service
Ogden, Utah 84201-0048

A foreign country or United Internal Revenue Service
States possession
P.O. Box 409101
Ogden, Utah 84409

• Give the IRS any information that is

missing from the estate's or trust's
return,
• Call the IRS for information about the
processing of the estate's or trust's
return or the status of its refund or
payment(s), and
• Respond to certain IRS notices that
the fiduciary has shared with the
preparer about math errors, offsets, and
return preparation. The notices won't be
sent to the preparer.
The fiduciary isn't authorizing the
paid preparer to receive any refund
check, bind the estate or trust to
anything (including any additional tax
liability), or otherwise represent the
estate or trust before the IRS.
The authorization will automatically
end no later than the due date (without
regard to extensions) for filing the
estate's or trust's 2022 tax return. If the
fiduciary wants to expand the paid
preparer's authorization or revoke the
authorization before it ends, see Pub.
947, Practice Before the IRS and Power
of Attorney.

Instructions for Form 1041 (2021)

Are enclosing a check or money
order ...

Department of the Treasury
Internal Revenue Service
Kansas City, MO 64999–0148

To change the accounting period of
an estate, use Form 1128, Application
To Adopt, Change, or Retain a Tax
Year.
Generally, a trust must adopt a
calendar year. The following trusts are
exempt from this requirement.
• A trust that is exempt from tax under
section 501(a).
• A charitable trust described in section
4947(a)(1).
• A trust that is treated as wholly owned
by a grantor under the rules of sections
671 through 679.

Rounding Off to Whole
Dollars

Department of the Treasury
Internal Revenue Service
Ogden, Utah 84201-0148

You may round off cents to whole
dollars on the estate's or trust's return
and schedules. If you do round to whole
dollars, you must round all amounts. To
round, drop amounts under 50 cents
and increase amounts from 50 to 99
cents to the next dollar. For example,
$1.39 becomes $1 and $2.50 becomes
$3.

Internal Revenue Service
P.O. Box 409101
Ogden, Utah 84409

If you have to add two or more
amounts to figure the amount to enter
on a line, include cents when adding the
amounts and round off only the total.

Accounting Methods

Figure taxable income using the method
of accounting regularly used in keeping
the estate's or trust's books and
records. Generally, permissible
methods include the cash method, the
accrual method, or any other method
authorized by the Internal Revenue
Code. In all cases, the method used
must clearly reflect income.

Generally, the estate or trust may
change its accounting method (for
income as a whole or for any material
item) only by getting consent on Form
3115, Application for Change in
Accounting Method. For more
information, see Pub. 538, Accounting
Periods and Methods.

Accounting Periods

For a decedent's estate, the moment of
death determines the end of the
decedent's tax year and the beginning
of the estate's tax year. As executor or
administrator, you choose the estate's
tax period when you file its first income
tax return. The estate's first tax year
may be any period of 12 months or less
that ends on the last day of a month. If
you select the last day of any month
-9-

If you are entering amounts that
include cents, make sure to include the
decimal point. There is no cents column
on the form.

Estimated Tax

Generally, an estate or trust must pay
estimated income tax for 2022 if it
expects to owe, after subtracting any
withholding and credits, at least $1,000
in tax, and it expects the withholding
and credits to be less than the smaller
of:
1. 90% of the tax shown on the
2022 tax return, or
2. 100% of the tax shown on the
2021 tax return (110% of that amount if
the estate's or trust's adjusted gross
income on that return is more than
$150,000, and less than 2/3 of gross
income for 2021 or 2022 is from farming
or fishing).
However, if a return was not filed for
2021 or that return didn't cover a full 12
months, item 2 doesn't apply.
For this purpose, include household
employment taxes in the tax shown on
the tax return, but only if either of the
following is true:
• The estate or trust will have federal
income tax withheld for 2022 (see the

instructions for Schedule G, Part II,
line 14), or
• The estate or trust would be required
to make estimated tax payments for
2022 even if it didn't include household
employment taxes when figuring
estimated tax.

Exceptions

Estimated tax payments aren't required
from:
1. An estate of a domestic decedent
or a domestic trust that had no tax
liability for the full 12-month 2021 tax
year;
2. A decedent's estate for any tax
year ending before the date that is 2
years after the decedent's death; or
3. A trust that was treated as owned
by the decedent if the trust will receive
the residue of the decedent's estate
under the will (or if no will is admitted to
probate, the trust primarily responsible
for paying debts, taxes, and expenses
of administration) for any tax year
ending before the date that is 2 years
after the decedent's death.
For more information, see Form
1041-ES, Estimated Income Tax for
Estates and Trusts.

Electronic Deposits

A financial institution that has been
designated as an authorized federal tax
depository, and acts as a fiduciary for at
least 200 taxable trusts that are required
to pay estimated tax, is required to
deposit the estimated tax payments
electronically using the Electronic
Federal Tax Payment System (EFTPS).
A fiduciary that isn't required to make
electronic deposits of estimated tax on
behalf of a trust or an estate may
voluntarily participate in EFTPS. To
enroll in or get more information about
EFTPS, visit the EFTPS website at
eftps.gov or call 1-800-555-4477. Also,
see Pub. 966, Electronic Federal Tax
Payment System: A Guide to Getting
Started.

Depositing on time. For a deposit
using EFTPS to be on time, the deposit
must be submitted by 8:00 p.m. Eastern
time the day before the due date of the
deposit.

Section 643(g) Election

Fiduciaries of trusts that pay estimated
tax may elect under section 643(g) to
have any portion of their estimated tax
payments allocated to any of the
beneficiaries.

The fiduciary of a decedent's estate
may make a section 643(g) election only
for the final year of the estate.

Don't attach an explanation when you
file Form 1041.

Make the election by filing Form
1041-T, Allocation of Estimated Tax
Payments to Beneficiaries, by the 65th
day after the close of the estate's or
trust's tax year. Then, include that
amount on Schedule K-1 (Form 1041),
box 13, code A, for any beneficiaries for
whom it was elected.

Generally, the penalty for not paying tax
when due is 1/2 of 1% of the unpaid
amount for each month or part of a
month it remains unpaid. The maximum
penalty is 25% of the unpaid amount.
The penalty applies to any unpaid tax on
the return. Any penalty is in addition to
interest charges on late payments.

If Form 1041-T was timely filed, the
payments are treated as paid or
credited to the beneficiary on the last
day of the tax year and must be
included as an other amount paid,
credited, or required to be distributed on
Form 1041, Schedule B, line 10. See
the instructions for Schedule B, line 10,
later.
Failure to make a timely election will
result in the estimated tax payments not
being transferred to the beneficiary(ies)
even if you entered the amount on
Schedule K-1.
See the instructions for line
Schedule G, Part II, line 11 for more
details.

Interest and Penalties
Interest

Interest is charged on taxes not paid by
the due date, even if an extension of
time to file is granted.
Interest is also charged on penalties
imposed for failure to file, negligence,
fraud, substantial valuation
misstatements, substantial
understatements of tax, and reportable
transaction understatements. Interest is
charged on the penalty from the due
date of the return (including extensions).
The interest charge is figured at a rate
determined under section 6621.

Late Filing of Return

Late Payment of Tax

If you include interest on either

TIP of these penalties with your

payment, identify and enter
these amounts in the bottom margin of
Form 1041, page 1. Don't include the
interest or penalty amount in the
balance of tax due on line 28.

Failure To Provide Information
Timely

You must provide Schedule K-1 (Form
1041), on or before the day you are
required to file Form 1041, to each
beneficiary who receives a distribution
of property or an allocation of an item of
the estate.
For each failure to provide
Schedule K-1 to a beneficiary when due
and each failure to include on
Schedule K-1 all the information
required to be shown (or the inclusion of
incorrect information), a $280 penalty
may be imposed with regard to each
Schedule K-1 for which a failure occurs.
The maximum penalty is $3,426,000 for
all such failures during a calendar year.
If the requirement to report information
is intentionally disregarded, each $280
penalty is increased to $570 or, if
greater, 10% of the aggregate amount
of items required to be reported, and the
$3,426,000 maximum doesn't apply.
The penalty won't be imposed if the
fiduciary can show that not providing
information timely was due to
reasonable cause and not due to willful
neglect.

The law provides a penalty of 5% of the
tax due for each month, or part of a
month, for which a return isn't filed up to
a maximum of 25% of the tax due (15%
for each month, or part of a month, up to
a maximum of 75% if the failure to file is
fraudulent). If the return is more than 60
days late, the minimum penalty is the
smaller of $435 or the tax due.

If the fiduciary underpaid estimated tax,
use Form 2210, Underpayment of
Estimated Tax by Individuals, Estates,
and Trusts, to figure any penalty. Enter
the amount of any penalty on Form
1041, line 27.

The penalty won't be imposed if you
can show that the failure to file on time
was due to reasonable cause. If you
receive a notice about penalty and
interest after you file this return, send us
an explanation and we will determine if
you meet reasonable-cause criteria.

This penalty may apply if certain excise,
income, social security, and Medicare
taxes that must be collected or withheld
aren't collected or withheld, or these
taxes aren't paid. These taxes are
generally reported on Forms 720, 941,

-10-

Underpaid Estimated Tax

Trust Fund Recovery Penalty

Instructions for Form 1041 (2021)

943, 944, or 945. The trust fund
recovery penalty may be imposed on all
persons who are determined by the IRS
to have been responsible for collecting,
accounting for, or paying over these
taxes, and who acted willfully in not
doing so. The penalty is equal to the
unpaid trust fund tax. See the
Instructions for Form 720, Pub. 15
(Circular E), Employer's Tax Guide, or
Pub. 51 (Circular A), Agricultural
Employer's Tax Guide, for more details,
including the definition of responsible
persons.

Other Penalties

Other penalties can be imposed for
negligence, substantial understatement
of tax, and fraud. See Pub. 17, Your
Federal Income Tax, for details on these
penalties.

Other Forms That May Be
Required

Form W-2, Wage and Tax Statement,
and Form W-3, Transmittal of Wage and
Tax Statements.
Form 56, Notice Concerning
Fiduciary Relationship. You must notify
the IRS of the creation or termination of
a fiduciary relationship. You may use
Form 56 to provide this notice to the
IRS.
Form 461, Limitation on Business
Losses.
Form 706, United States Estate (and
Generation-Skipping Transfer) Tax
Return, or Form 706-NA, United States
Estate (and Generation-Skipping
Transfer) Tax Return, Estate of
nonresident not a citizen of the United
States.
Form 706-GS(D),
Generation-Skipping Transfer Tax
Return for Distributions.
Form 706-GS(D-1), Notification of
Distribution From a Generation-Skipping
Trust.
Form 706-GS(T),
Generation-Skipping Transfer Tax
Return for Terminations.
Form 709, United States Gift (and
Generation-Skipping Transfer) Tax
Return.
Form 720, Quarterly Federal Excise
Tax Return. Use Form 720 to report
environmental excise taxes,
communications and air transportation
taxes, fuel taxes, luxury tax on
passenger vehicles, manufacturers'
taxes, ship passenger tax, and certain
other excise taxes.

Instructions for Form 1041 (2021)

Caution. See Trust Fund Recovery
Penalty earlier.
Form 926, Return by a U.S.
Transferor of Property to a Foreign
Corporation. Use this form to report
certain information required under
section 6038B.
Form 940, Employer's Annual
Federal Unemployment (FUTA) Tax
Return. The estate or trust may be liable
for FUTA tax and may have to file Form
940 if it paid wages of $1,500 or more in
any calendar quarter during the
calendar year (or the preceding
calendar year) or one or more
employees worked for the estate or trust
for some part of a day in any 20 different
weeks during the calendar year (or the
preceding calendar year).
Form 941, Employer's QUARTERLY
Federal Tax Return. Employers must file
this form quarterly to report income tax
withheld on wages and employer and
employee social security and Medicare
taxes. Certain small employers must file
Form 944, Employer's ANNUAL Federal
Tax Return, instead of Form 941. For
more information, see the Instructions
for Form 944. Agricultural employers
must file Form 943, Employer's Annual
Federal Tax Return for Agricultural
Employees, instead of Form 941, to
report income tax withheld and
employer and employee social security
and Medicare taxes on farmworkers.
Caution. See Trust Fund Recovery
Penalty earlier.
Form 945, Annual Return of Withheld
Federal Income Tax. Use this form to
report income tax withheld from
nonpayroll payments, including
pensions, annuities, IRAs, gambling
winnings, and backup withholding.
Caution. See Trust Fund Recovery
Penalty earlier.
Form 965-A, Individual Report of Net
965 Tax Liability.
Form 982, Reduction of Tax
Attributes Due to Discharge of
Indebtedness (and Section 1082 Basis
Adjustment).
Form 1040, U.S. Individual Income
Tax Return.
Form 1040-NR, U.S. Nonresident
Alien Income Tax Return.
Form 1040-SR, U.S. Tax Return for
Seniors.
Form 1041-A, U.S. Information
Return Trust Accumulation of Charitable
Amounts.
-11-

Form 1042, Annual Withholding Tax
Return for U.S. Source Income of
Foreign Persons, and Form 1042-S,
Foreign Person's U.S. Source Income
Subject to Withholding. Use these forms
to report and transmit withheld tax on
payments or distributions made to
nonresident alien individuals, foreign
partnerships, or foreign corporations to
the extent such payments or
distributions constitute gross income
from sources within the United States
that isn't effectively connected with a
U.S. trade or business. For more
information, see sections 1441 and
1442, and Pub. 515, Withholding of Tax
on Nonresident Aliens and Foreign
Entities.
Forms 1099-A, B, INT, LTC, MISC,
NEC, OID, Q, R, S, and SA. You may
have to file these information returns to
report acquisitions or abandonments of
secured property; proceeds from broker
and barter exchange transactions;
interest payments; payments of
long-term care and accelerated death
benefits; nonemployee compensation;
miscellaneous income payments;
original issue discount; distributions
from Coverdell ESAs; distributions from
pensions, annuities, retirement or
profit-sharing plans, IRAs (including
SEPs, SIMPLEs, Roth IRAs, Roth
Conversions, and IRA
recharacterizations), insurance
contracts, etc.; proceeds from real
estate transactions; and distributions
from an HSA, Archer MSA, or Medicare
Advantage MSA.
Also, use certain of these returns to
report amounts received as a nominee
on behalf of another person, except
amounts reported to beneficiaries on
Schedule K-1 (Form 1041).
Form 8275, Disclosure Statement.
File Form 8275 to disclose items or
positions, except those contrary to a
regulation, that are not otherwise
adequately disclosed on a tax return.
The disclosure is made to avoid parts of
the accuracy-related penalty imposed
for disregard of rules or substantial
understatement of tax. Form 8275 is
also used for disclosures relating to
preparer penalties for understatements
due to unrealistic positions or disregard
of rules.
Form 8275-R, Regulation Disclosure
Statement, is used to disclose any item
on a tax return for which a position has
been taken that is contrary to Treasury
regulations.
Form 8288, U.S. Withholding Tax
Return for Dispositions by Foreign

Persons of U.S. Real Property Interests,
and Form 8288-A, Statement of
Withholding on Dispositions by Foreign
Persons of U.S. Real Property Interests.
Use these forms to report and transmit
withheld tax on the sale of U.S. real
property by a foreign person. Also, use
these forms to report and transmit tax
withheld from amounts distributed to a
foreign beneficiary from a “U.S. real
property interest account” that a
domestic estate or trust is required to
establish under Regulations section
1.1445-5(c)(1)(iii).
Form 8300, Report of Cash
Payments Over $10,000 Received in a
Trade or Business. Generally, this form
is used to report the receipt of more
than $10,000 in cash or foreign currency
in one transaction (or a series of related
transactions).
Form 8855, Election To Treat a
Qualified Revocable Trust as Part of an
Estate. This election allows a qualified
revocable trust to be treated and taxed
(for income tax purposes) as part of its
related estate during the election period.
Form 8865, Return of U.S. Persons
With Respect to Certain Foreign
Partnerships. The estate or trust may
have to file Form 8865 if it:
1. Controlled a foreign partnership
(that is, owned more than a 50% direct
or indirect interest in a foreign
partnership);
2. Owned at least a 10% direct or
indirect interest in a foreign partnership
while U.S. persons controlled that
partnership;
3. Had an acquisition, disposition, or
change in proportional interest in a
foreign partnership that:
a. Increased its direct interest to at
least 10%;
b. Reduced its direct interest of at
least 10% to less than 10%; or
c. Changed its direct interest by at
least a 10% interest.
4. Contributed property to a foreign
partnership in exchange for a
partnership interest if:
a. Immediately after the
contribution, the estate or trust owned,
directly or indirectly, at least a 10%
interest in the foreign partnership or
b. The fair market value (FMV) of
the property the estate or trust
contributed to the foreign partnership,
for a partnership interest, when added
to other contributions of property made
to the foreign partnership during the
preceding 12-month period, exceeds
$100,000.

Also, the estate or trust may have to
file Form 8865 to report certain
dispositions by a foreign partnership of
property it previously contributed to that
foreign partnership if it was a partner at
the time of the disposition.
For more details, including penalties
for failing to file Form 8865, see Form
8865 and its separate instructions.
Form 8886, Reportable Transaction
Disclosure Statement. Use Form 8886
to disclose information for each
reportable transaction in which the trust
participated, directly or indirectly. Form
8886 must be filed for each tax year that
the federal income tax liability of the
estate or trust is affected by its
participation in the transaction. The
estate or trust may have to pay a
penalty if it has a requirement to file
Form 8886 but you fail to file it. The
following are reportable transactions.
• Any transaction that is the same as or
substantially similar to tax avoidance
transactions identified by the IRS as
listed transactions.
• Any transaction offered under
conditions of confidentiality and for
which the estate or trust paid a minimum
fee (confidential transaction).
• Any transaction for which the estate
or trust or a related party has
contractual protection against
disallowance of the tax benefits
(transaction with contractual protection).
• Any transaction resulting in a loss of
at least $2 million in any single year or
$4 million in any combination of years
($50,000 in any single year if the loss is
generated by a section 988 transaction)
(loss transactions).
• Any transaction substantially similar
to one of the types of transactions
identified by the IRS as a transaction of
interest.
See the Instructions for Form 8886
for more details and exceptions.
Form 8918, Material Advisor
Disclosure Statement. Material advisors
who provide material aid, assistance, or
advice on organizing, managing,
promoting, selling, implementing,
insuring, or carrying out any reportable
transaction, and who directly or
indirectly receive or expect to receive a
minimum fee, must use Form 8918 to
disclose any reportable transaction
under Regulations section 301.6111-3.
For more information, see Form 8918
and its instructions.
Form 8938, Statement of Specified
Foreign Financial Assets.
Form 8939, Allocation of Increase in
Basis for Property Acquired From a
-12-

Decedent. This form is used to allocate
any additional basis when an executor
makes the special section 1022 election
for property acquired from a decedent
who died in 2010.
Form 8960, Net Investment Income
Tax—Individuals, Estates, and Trusts.
Form 8971, Information Regarding
Beneficiaries Acquiring Property From a
Decedent.
Form 8975, Country-by-Country
Report.
Schedule A (Form 8975), Tax
Jurisdiction and Constituent Entity
Information.
Form 8978, Partner's Additional
Reporting Year Tax.
Form 8990, Limitation on Business
Interest Expense Under Section 163(j).
Form 8992, U.S. Shareholder
Calculation of Global Intangible
Low-Taxed Income (GILTI).
Form 8995, Qualified Business
Income Deduction - Simplified
Computation.
Form 8995-A, Qualified Business
Income Deduction.
Form 8997, Initial Annual Statement
of Qualified Opportunity Fund (QOF)
Investments.

Additional Information

The following publications may assist
you in preparing Form 1041:
• Pub. 550, Investment Income and
Expenses,
• Pub. 559, Survivors, Executors, and
Administrators,
• Pub. 590-A, Contributions to
Individual Retirement Arrangements
(IRAs),
• Pub. 590-B, Distributions from
Individual Retirement Arrangements
(IRAs), and
• Pub. 4895, Tax Treatment of Property
Acquired From a Decedent Dying in
2010.

Assembly and
Attachments

Assemble any schedules, forms, and
attachments behind Form 1041 in the
following order:
1. Schedule I (Form 1041);
2. Schedule D (Form 1041);
3. Form 4952;
4. Schedule H (Form 1040);
5. Form 3800;
Instructions for Form 1041 (2021)

6. Form 4136;
7. Form 8855;
8. Form 8960;
9. All other schedules and
forms; and
10. All attachments.

Attachments

If you need more space on the forms or
schedules, attach separate sheets. Use
the same size and format as on the
printed forms. But show the totals on the
printed forms.
Attach these separate sheets after all
the schedules and forms. Enter the
estate's or trust's EIN on each sheet.
Don't file a copy of the decedent's will
or the trust instrument unless the IRS
requests it.

Special Reporting
Instructions
Grantor type trusts, the S portion of
electing small business trusts (ESBTs),
and bankruptcy estates all have
reporting requirements that are
significantly different than other
Subchapter J trusts and decedent's
estates. Additionally, grantor type trusts
have optional filing methods available.
Pooled income funds have many similar
reporting requirements that other
Subchapter J trusts (other than grantor
type trusts and electing small business
trusts) have but there are some very
important differences. These reporting
differences and optional filing methods
are discussed below by entity.

Grantor Type Trusts

A trust is a grantor trust if the grantor
retains certain powers or ownership
benefits. This can also apply to only a
portion of a trust. See Grantor Type
Trust, later, for details on what makes a
trust a grantor trust.
In general, a grantor trust is ignored
for income tax purposes and all of the
income, deductions, etc., are treated as
belonging directly to the grantor. This
also applies to any portion of a trust that
is treated as a grantor trust.
Note. If only a portion of the trust is a
grantor type trust, indicate both grantor
trust and the other type of trust, for
example, simple or complex trust, as the
type of entities checked in Section A on
page 1 of Form 1041.

Instructions for Form 1041 (2021)

The following instructions apply
only to grantor type trusts that
CAUTION are not using an optional filing
method.

!

How to report. If the entire trust is a
grantor trust, fill in only the entity
information of Form 1041. Don't show
any dollar amounts on the form itself;
show dollar amounts only on an
attachment to the form. Don't use
Schedule K-1 (Form 1041) as the
attachment.
If only part of the trust is a grantor
type trust, the portion of the income,
deductions, etc., that is allocable to the
non-grantor part of the trust is reported
on Form 1041, under normal reporting
rules. The amounts that are allocable
directly to the grantor are shown only on
an attachment to the form. Don't use
Schedule K-1 (Form 1041) as the
attachment. However, Schedule K-1 is
used to reflect any income distributed
from the portion of the trust that isn't
taxable directly to the grantor or owner.
The fiduciary must give the grantor
(owner) of the trust a copy of the
attachment.
Attachment. On the attachment,
show:
• The name, identifying number, and
address of the person(s) to whom the
income is taxable;
• The income of the trust that is taxable
to the grantor or another person under
sections 671 through 678. Report the
income in the same detail as it would be
reported on the grantor's return had it
been received directly by the grantor;
and
• Any deductions or credits that apply
to this income. Report these deductions
and credits in the same detail as they
would be reported on the grantor's
return had they been received directly
by the grantor.
The income taxable to the grantor or
another person under sections 671
through 678 and the deductions and
credits that apply to that income must
be reported by that person on their own
income tax return.
Example. The John Doe Trust is a
grantor type trust. During the year, the
trust sold 100 shares of ABC stock for
$1,010 in which it had a basis of $10
and 200 shares of XYZ stock for $10 in
which it had a $1,020 basis.
The trust doesn't report these
transactions on Form 1041. Instead, a
schedule is attached to the Form 1041
showing each stock transaction
separately and in the same detail as
-13-

John Doe (grantor and owner) will need
to report these transactions on his Form
8949, Sales and Other Dispositions of
Capital Assets and Schedule D (Form
1040). The trust doesn't net the capital
gains and losses, nor does it issue John
Doe a Schedule K-1 (Form 1041)
showing a $10 long-term capital loss.
QSSTs. Income allocated to S
corporation stock held by the trust is
treated as owned by the income
beneficiary of the portion of the trust that
owns the stock. Report this income
following the rules discussed above for
grantor type trusts. A QSST can't elect
any of the optional filing methods
discussed below.
However, the trust, and not the
income beneficiary, is treated as the
owner of the S corporation stock for
figuring and attributing the tax results of
a disposition of the stock. For example,
if the disposition is a sale, the QSST
election ends as to the stock sold and
any gain or loss recognized on the sale
will be that of the trust. For more
information on QSSTs, see Regulations
section 1.1361-1(j).

Optional Filing Methods for Certain
Grantor Type Trusts
Generally, if a trust is treated as owned
by one grantor or other person, the
trustee may choose Optional Method 1
or Optional Method 2 as the trust's
method of reporting instead of filing
Form 1041. A husband and wife will be
treated as one grantor for purposes of
these two optional methods if:
• All of the trust is treated as owned by
the husband and wife, and
• The husband and wife file their
income tax return jointly for that tax
year.
Generally, if a trust is treated as
owned by two or more grantors or other
persons, the trustee may choose
Optional Method 3 as the trust's method
of reporting instead of filing Form 1041.
Once you choose the trust's filing
method, you must follow the rules under
Changing filing methods if you want to
change to another method.
Exceptions. The following trusts can't
report using the optional filing methods.
• A common trust fund (as defined in
section 584(a)).
• A foreign trust or a trust that has any
of its assets located outside the United
States.
• A qualified subchapter S trust (as
defined in section 1361(d)(3)).

• A trust all of which is treated as
owned by one grantor or one other
person whose tax year is other than a
calendar year.
• A trust all of which is treated as
owned by one or more grantors or other
persons, one of which isn't a U.S.
person.
• A trust all of which is treated as
owned by one or more grantors or other
persons if at least one grantor or other
person is an exempt recipient for
information reporting purposes, unless
at least one grantor or other person isn't
an exempt recipient and the trustee
reports without treating any of the
grantors or other persons as exempt
recipients.
Optional Method 1. For a trust treated
as owned by one grantor or by one
other person, the trustee must give all
payers of income during the tax year the
name and TIN of the grantor or other
person treated as the owner of the trust
and the address of the trust. This
method may be used only if the owner
of the trust provides the trustee with a
signed Form W-9, Request for Taxpayer
Identification Number and Certification.
In addition, unless the grantor or other
person treated as owner of the trust is
the trustee or a co-trustee of the trust,
the trustee must give the grantor or
other person treated as owner of the
trust a statement that:
• Shows all items of income, deduction,
and credit of the trust;
• Identifies the payer of each item of
income;
• Explains how the grantor or other
person treated as owner of the trust
takes those items into account when
figuring the grantor's or other person's
taxable income or tax; and
• Informs the grantor or other person
treated as the owner of the trust that
those items must be included when
figuring taxable income and credits on
his or her income tax return.
Grantor trusts that haven't

TIP applied for an EIN and are going

to file under Optional Method 1
don't need an EIN for the trust as long
as they continue to report under that
method.

Optional Method 2. For a trust treated
as owned by one grantor or by one
other person, the trustee must give all
payers of income during the tax year the
name, address, and TIN of the trust.
The trustee also must file with the IRS
the appropriate Forms 1099 to report
the income or gross proceeds paid to
the trust during the tax year that shows

the trust as the payer and the grantor, or
other person treated as owner, as the
payee. The trustee must report each
type of income in the aggregate and
each item of gross proceeds separately.
The due date for any Forms 1099
required to be filed with the IRS by a
trustee under this method is February
28, 2022 (March 31, 2022, if filed
electronically).
In addition, unless the grantor, or
other person treated as owner of the
trust, is the trustee or a co-trustee of the
trust, the trustee must give the grantor
or other person treated as owner of the
trust a statement that:
• Shows all items of income, deduction,
and credit of the trust;
• Explains how the grantor or other
person treated as owner of the trust
takes those items into account when
figuring the grantor's or other person's
taxable income or tax; and
• Informs the grantor or other person
treated as the owner of the trust that
those items must be included when
figuring taxable income and credits on
his or her income tax return. This
statement satisfies the requirement to
give the recipient copies of the Forms
1099 filed by the trustee.
Optional Method 3. For a trust treated
as owned by two or more grantors or
other persons, the trustee must give all
payers of income during the tax year the
name, address, and TIN of the trust.
The trustee also must file with the IRS
the appropriate Forms 1099 to report
the income or gross proceeds paid to
the trust by all payers during the tax
year attributable to the part of the trust
treated as owned by each grantor, or
other person, showing the trust as the
payer and each grantor, or other person
treated as owner of the trust, as the
payee. The trustee must report each
type of income in the aggregate and
each item of gross proceeds separately.
The due date for any Forms 1099
required to be filed with the IRS by a
trustee under this method is February
28, 2022 (March 31, 2022, if filed
electronically).
In addition, the trustee must give
each grantor or other person treated as
owner of the trust a statement that:
• Shows all items of income, deduction,
and credit of the trust attributable to the
part of the trust treated as owned by the
grantor or other person;
• Explains how the grantor or other
person treated as owner of the trust
takes those items into account when
figuring the grantor's or other person's
taxable income or tax; and
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• Informs the grantor or other person
treated as the owner of the trust that
those items must be included when
figuring taxable income and credits on
his or her income tax return. This
statement satisfies the requirement to
give the recipient copies of the Forms
1099 filed by the trustee.
Changing filing methods. A trustee
who previously had filed Form 1041 can
change to one of the optional methods
by filing a final Form 1041 for the tax
year that immediately precedes the first
tax year for which the trustee elects to
report under one of the optional
methods. On the front of the final Form
1041, the trustee must write “Pursuant
to section 1.671-4(g), this is the final
Form 1041 for this grantor trust,” and
check the Final return box in item F.
For more details on changing
reporting methods, including changes
from one optional method to another,
see Regulations section 1.671-4(g).
Backup withholding. The following
grantor trusts are treated as payors for
purposes of backup withholding.
1. A trust established after 1995, all
of which is owned by two or more
grantors (treating spouses filing a joint
return as one grantor).
2. A trust with 10 or more grantors
established after 1983 but before 1996.
The trustee must withhold a certain
percentage of reportable payments
made to any grantor who is subject to
backup withholding.
For more information, see section
3406 and its regulations.

Pooled Income Funds

If you are filing for a pooled income
fund, attach a statement to support the
following:
• The calculation of the yearly rate of
return,
• The computation of the deduction for
distributions to the beneficiaries, and
• The computation of any charitable
deduction.
See section 642 and the regulations
thereunder for more information.
You don't have to complete
Schedules A or B of Form 1041.
Also, you must file Form 5227,
Split-Interest Trust Information Return,
for the pooled income fund. However, if
all amounts were transferred in trust
before May 27, 1969, or if an amount
was transferred to the trust after May
26, 1969, for which no deduction was
allowed under any of the sections listed
Instructions for Form 1041 (2021)

under section 4947(a)(2), then Form
5227 does not have to be filed.
Note. Form 1041-A is no longer filed by
pooled income funds.

Electing Small Business Trusts
(ESBTs)

Special rules apply when figuring the tax
on the S portion of an ESBT. The S
portion of an ESBT is the portion of the
trust that consists of stock in one or
more S corporations and isn't treated as
a grantor type trust. The tax on the S
portion:
• Must be figured separately from the
tax on the remainder of the ESBT (if
any) and attached to the return, and
• Is entered on Schedule G, Part I,
line 4.
The tax on the remainder (non-S
portion) of the ESBT is figured in the
normal manner on Form 1041.
Tax computation attachment. Attach
to the return the tax computation for the
S portion of the ESBT.
If you need to complete and attach a
tax form or worksheet for the S portion
of the trust, write “ESBT” in the top
margin of the tax form, worksheet, or
attachment.
To compute the tax on the S portion:
• Treat that portion of the ESBT as if it
were a separate trust;
• Include only the income, losses,
deductions, and credits allocated to the
ESBT as an S corporation shareholder
and gain or loss from the disposition of
S corporation stock;
• Aggregate items of income, losses,
deductions, and credits allocated to the
ESBT as an S corporation shareholder if
the S portion of the ESBT has stock in
more than one S corporation;
• Deduct state and local income taxes
directly related to the S portion or
allocated to the S portion if the
allocation is reasonable in light of all the
circumstances and administrative
expenses that wouldn't have been
incurred if the S corporation shares
were not held by the trust;
• Deduct interest expense paid or
accrued on indebtedness incurred to
acquire stock in an S corporation;
• Deduct charitable contributions
attributable to the S portion. See Pub.
526 to figure the amount of the
deduction if either of the following apply.
1. Cash contributions or
contributions of ordinary income
property are more than 30% of the AGI
of the S portion.

Instructions for Form 1041 (2021)

2. Gifts of capital gain property are
more than 20% of the AGI of the S
portion.
• Don't claim a deduction for capital
losses in excess of capital gains;
• Don't claim an income distribution
deduction or an exemption amount;
• Don't claim an exemption amount in
figuring the AMT; and
• Don't use the tax rate schedule to
figure the tax. The tax is 37% of the S
portion's taxable income except in
figuring the maximum tax on qualified
dividends and capital gains.
For additional information, see
Regulations section 1.641(c)-1.
Other information. When figuring the
tax and DNI on the remaining (non-S)
portion of the trust, disregard the S
corporation items.
Don't apportion to the beneficiaries
any of the S corporation items.
If the ESBT consists entirely of stock
in one or more S corporations, don't
make any entries on lines 1–23
of page 1. Instead:
• Complete the entity portion;
• Follow the instructions above for
figuring the tax on the S corporation
items;
• Enter the ESBT tax on Schedule G,
Part I, line 4;
• Carry the Total tax from line 9 of
Schedule G, Part I, to line 24 on page 1;
and
• Complete the rest of the return.
The grantor portion (if any) of an
ESBT will follow the rules discussed
under Grantor Type Trusts, earlier.

Bankruptcy Estates

The bankruptcy estate that is created
when an individual debtor files a petition
under either chapter 7 or 11 of title 11 of
the U.S. Code is treated as a separate
taxable entity. The bankruptcy estate is
administered by a trustee or a
debtor-in-possession. If the case is later
dismissed by the bankruptcy court, the
individual debtor is treated as if the
bankruptcy petition had never been
filed.
A separate taxable entity isn't
created if a partnership or corporation
files a petition under any chapter of title
11 of the U.S. Code.
For additional information about
bankruptcy estates, see Pub. 908,
Bankruptcy Tax Guide.

Who Must File

Every trustee (or debtor-in-possession)
for an individual's bankruptcy estate
under chapter 7 or 11 of title 11 of the
-15-

U.S. Code must file a return if the
bankruptcy estate has gross income of
$12,550 or more for tax years beginning
in 2021.
Failure to do so may result in an
estimated Request for Administrative
Expenses being filed by the IRS in the
bankruptcy proceeding or a motion to
compel filing of the return.
The filing of a tax return for the
bankruptcy estate doesn't
CAUTION relieve the individual debtor(s)
of his, her, or their individual tax
obligations.

!

EIN

Every bankruptcy estate of an individual
required to file a return must have its
own EIN. The SSN of the individual
debtor can't be used as the EIN for the
bankruptcy estate.

Accounting Period
A bankruptcy estate is allowed to have a
fiscal year. However, this period can't
be longer than 12 months.

When To File
File Form 1041 on or before the 15th
day of the 4th month following the close
of the tax year. Use Form 7004 to apply
for an automatic 6-month extension of
time to file.

Disclosure of Return Information
Under section 6103(e)(5), tax returns of
individual debtors who have filed for
bankruptcy under chapters 7 or 11 of
title 11 are, upon written request, open
to inspection by or disclosure to the
trustee.
The returns subject to disclosure to
the trustee are those for the year the
bankruptcy begins and prior years. Use
Form 4506, Request for Copy of Tax
Return, to request copies of the
individual debtor's tax returns.
If the bankruptcy case wasn't
voluntary, disclosure can't be made
before the bankruptcy court has entered
an order for relief, unless the court rules
that the disclosure is needed for
determining whether relief should be
ordered.

Transfer of Tax Attributes From
the Individual Debtor to the
Bankruptcy Estate
The bankruptcy estate succeeds to the
following tax attributes of the individual
debtor:

1. Net operating loss (NOL)
carryovers;
2. Charitable contribution
carryovers;
3. Recovery of tax benefit items;
4. Credit carryovers;
5. Capital loss carryovers;
6. Basis, holding period, and
character of assets;
7. Method of accounting;
8. Unused passive activity losses;
9. Unused passive activity credits;
and
10. Unused section 465 losses.

Income, Deductions, and Credits
Under section 1398(c), the taxable
income of the bankruptcy estate
generally is figured in the same manner
as that of an individual. The gross
income of the bankruptcy estate
includes any income included in
property of the estate as defined in U.S.
Code, title 11, sections 541 and 1115.
Under section 1115 of title 11,
property of the bankruptcy estate
includes (a) earnings from services
performed by the debtor after the
beginning of the case (both wages and
self-employment income) and before
the case is closed, dismissed, or
converted to a case under a different
chapter and (b) property described in
section 541 of title 11 and income
earned therefrom that the debtor
acquires after the beginning of the case
and before the case is closed,
dismissed, or converted. If section 1115
of title 11 applies, the bankruptcy
estate's gross income includes, as
described above, (a) the debtor's
earnings from services performed after
the beginning of the case and (b) the
income from property acquired after the
beginning of the case.
The income from property owned by
the debtor when the case began is also
included in the bankruptcy estate's
gross income. However, if this property
is exempted from the bankruptcy estate
or is abandoned by the trustee or
debtor-in-possession, the income from
the property isn't included in the
bankruptcy estate's gross income. Also
included in income is gain from the sale
of the bankruptcy estate's property. To
figure gain, the trustee or
debtor-in-possession must determine
the correct basis of the property.
To determine whether any amount
paid or incurred by the bankruptcy

estate is allowable as a deduction or
credit, or is treated as wages for
employment tax purposes, treat the
amount as if it were paid or incurred by
the individual debtor in the same trade
or business or other activity the debtor
engaged in before the bankruptcy
proceedings began.
Administrative expenses. The
bankruptcy estate is allowed a
deduction for any administrative
expense allowed under section 503 of
title 11 of the U.S. Code, and any fee or
charge assessed under chapter 123 of
title 28 of the U.S. Code, to the extent
not disallowed under an Internal
Revenue Code provision (for example,
section 263, 265, or 275).
Bankruptcy administrative expenses
and fees, including accounting fees,
attorney fees, and court costs are
deductible on Schedule 1 (Form 1040),
as allowable in arriving at adjusted
gross income because they would not
have been incurred if property had not
been held by the bankruptcy estate. See
Internal Revenue Code section 67(e)
and Final Regulations - TD9918.
Administrative expenses of the
bankruptcy estate attributable to
conducting a trade or business or for the
production of estate rents or royalties
are deductible in arriving at adjusted
gross income on Form 1040, Schedules
C, E, and F.

536 and Pub. 225, Farmer’s Tax Guide,
for more information.
If the bankruptcy estate itself incurs
an NOL (apart from losses carried
forward to the estate from the individual
debtor), it can carry back its NOLs not
only to previous tax years of the
bankruptcy estate, but also to tax years
of the individual debtor prior to the year
in which the bankruptcy proceedings
began.
Excess credits, such as the foreign
tax credit, also may be carried back to
pre-bankruptcy years of the individual
debtor.
Standard deduction. A bankruptcy
estate that doesn't itemize deductions is
allowed a standard deduction of
$12,550 for tax year 2021.
Discharge of indebtedness. In a title
11 case, gross income doesn't include
amounts that normally would be
included in gross income resulting from
the discharge of indebtedness.
However, any amounts excluded from
gross income must be applied to reduce
certain tax attributes in a certain order.
Attach Form 982, Reduction of Tax
Attributes Due to Discharge of
Indebtedness (and Section 1082 Basis
Adjustment), to show the reduction of
tax attributes.

Tax Rate Schedule

Administrative expense loss. When
figuring an NOL, nonbusiness
deductions (including administrative
expenses) are limited under section
172(d)(4) to the bankruptcy estate's
nonbusiness income. The excess
nonbusiness deductions are an
administrative expense loss that may be
carried back to each of the 3 preceding
tax years and forward to each of the 7
succeeding tax years of the bankruptcy
estate. The amount of an administrative
expense loss that may be carried to any
tax year is determined after the NOL
deductions allowed for that year. An
administrative expense loss is allowed
only to the bankruptcy estate and can't
be carried to any tax year of the
individual debtor.

Figure the tax for the bankruptcy estate
using the tax rate schedule below. Enter
the tax on Form 1040 or 1040-SR,
line 16.

Carryback of NOLs and credits.

To request a prompt determination of
the tax liability of the bankruptcy estate,
the trustee or debtor-in-possession
must file a written request for the
determination with the IRS. The request
must be submitted in duplicate and
executed under penalties of perjury.
The request must include a statement
indicating that it is a request for prompt
determination of tax liability and (a) the

Generally, an NOL arising in a
tax year beginning in 2021 or
CAUTION later may not be carried back
and instead must be carried forward
indefinitely. However, farming losses
arising in tax years beginning in 2021 or
later may be carried back 2 years and
carried forward indefinitely. See Pub.

!

-16-

If taxable income is:
Over—

But not
over—

$0
9,950
40,525
86,375
164,925
209,425
314,150

$9,950
40,525
86,375
164,925
209,425
314,150
......

Of the
The tax is: amount
over—
10%
$0
$995.00 + 12%
9,950
4,664.00 + 22%
40,525
14,751.00 + 24%
86,375
33,603.00 + 32% 164,925
47,843.00 + 35% 209,425
84,496.75 + 37% 314,150

Prompt Determination of Tax
Liability

Instructions for Form 1041 (2021)

return type, and all the tax periods for
which prompt determination is sought;
(b) the name and location of the office
where the return was filed; (c) the
debtor's name; (d) the debtor's SSN,
TIN, or EIN; (e) the type of bankruptcy
estate; (f) the bankruptcy case number;
and (g) the court where the bankruptcy
is pending. Send the request to the
Centralized Insolvency Operation, P.O.
Box 7346, Philadelphia, PA 19101-7346
(marked “Request for Prompt
Determination”).
The IRS will notify the trustee or
debtor-in-possession within 60 days
from receipt of the request if the return
filed by the trustee or
debtor-in-possession has been selected
for examination or has been accepted
as filed. If the return is selected for
examination, it will be examined as soon
as possible. The IRS will notify the
trustee or debtor-in-possession of any
tax due within 180 days from receipt of
the request or within any additional time
permitted by the bankruptcy court.
See Rev. Proc. 2006-24, 2006-22
I.R.B. 943, available at IRS.gov/irb/
2006-22_IRB/ar12.html, modified by
Announcement 2011–77, available at
IRS.gov/irb/2011-51_IRB/ar13.

Special Filing Instructions for
Bankruptcy Estates
Use Form 1041 only as a transmittal for
Form 1040 or 1040-SR. In the top
margin of Form 1040 or 1040-SR write
“Attachment to Form 1041. DO NOT
DETACH.” Attach Form 1040 or
1040-SR to Form 1041. Complete only
the identification area at the top of Form
1041. Enter the name of the individual
debtor in the following format: “John Q.
Public Bankruptcy Estate.” Beneath,
enter the name of the trustee in the
following format: “Avery Snow, Trustee.”
In item D, enter the date the petition was
filed or the date of conversion to a
chapter 7 or 11 case.
Enter on Form 1041, line 24, the total
tax from line 24 of Form 1040 or
1040-SR. Complete lines 25 through 30
of Form 1041, and sign and date it.
In a chapter 11 case filed after
October 16, 2005, the bankruptcy
estate's gross income may be affected
by section 1115 of title 11 of the U.S.
Code. See Income, Deductions, and
Credits earlier. The debtor may receive
a Form W-2, 1099-INT, 1099-DIV,
1099-MISC, or 1099-NEC or other
information return reporting wages or

other income to the debtor for the entire
year, even though some or all of this
income is includible in the bankruptcy
estate's gross income under section
1115 of title 11 of the U.S. Code. If this
happens, the income reported to the
debtor on the Form W-2 or 1099, or
other information return (and the
withheld income tax shown on these
forms) must be reasonably allocated
between the debtor and the bankruptcy
estate. The debtor-in-possession (or the
chapter 11 trustee, if one was
appointed) must attach a schedule that
shows (a) all the income reported on the
Form W-2, Form 1099, or other
information return, (b) the portion of this
income includible in the bankruptcy
estate's gross income, and (c) all the
withheld income tax, if any, and the
portion of withheld tax reasonably
allocated to the bankruptcy estate. Also,
the debtor-in-possesion (or the
chapter 11 trustee, if one was
appointed) must attach a copy of the
Form W-2, if any, issued to the debtor
for the tax year if the Form W-2 reports
wages to the debtor and some or all of
the wages are includible in the
bankruptcy estate's gross income
because of section 1115 of title 11 of
the U.S. Code. For more details,
including acceptable allocation
methods, see Notice 2006-83, 2006-40
I.R.B. 596, available at IRS.gov/irb/
2006-40_IRB/ar12.html.

Specific Instructions
Name of Estate or Trust

Copy the exact name of the estate or
trust from the Form SS-4, Application for
Employer Identification Number, that
you used to apply for the EIN. If the
name of the trust was changed during
the tax year for which you are filing,
enter the trust's new name and check
the Change in trust's name box in item
F.
If a grantor type trust (discussed
later), write the name, identification
number, and address of the grantor(s)
or other owner(s) in parentheses after
the name of the trust.

Name and Title of
Fiduciary

Enter the name and title of the fiduciary.
If the name entered is different than the
name on the prior year's return, see
Change in Fiduciary's Name and
Change in Fiduciary, later.

-17-

Address

Include the suite, room, or other unit
number after the street address. If the
post office doesn't deliver mail to the
street address and the fiduciary has a
P.O. box, show the box number instead.
If you want a third party (such as an
accountant or an attorney) to receive
mail for the estate or trust, enter on the
street address line “C/O” followed by the
third party's name and street address or
P.O. box.
If the estate or trust has had a
change of address (including a change
to an “in care of” name and address)
and did not file Form 8822-B, Change of
Address or Responsible Party —
Business, check the Change in
fiduciary's address box in item F.
If the estate or trust has a change of
mailing address (including a new "in
care of" name and address) or
responsible party after filing its return,
file Form 8822-B to notify the IRS of the
change.

A. Type of Entity

Check the appropriate box(es) that
describes the entity for which you are
filing the return.
In some cases, more than one box is
checked. Check all boxes that apply to
your trust. For example, if only a portion
of a trust is a grantor type trust or if only
a portion of an electing small business
trust is the S portion, then more than
one box is checked.
Note. Determination of entity status is
made on an annual basis.
There are special reporting
requirements for grantor type
CAUTION trusts, pooled income funds,
electing small business trusts, and
bankruptcy estates. See Special
Reporting Instructions, earlier.

!

Decedent's Estate

An estate of a deceased person is a
taxable entity separate from the
decedent. It generally continues to exist
until the final distribution of the assets of
the estate is made to the heirs and other
beneficiaries. The income earned from
the property of the estate during the
period of administration or settlement
must be accounted for and reported by
the estate.

Simple Trust

A trust may qualify as a simple trust if:
1. The trust instrument requires that
all income must be distributed currently;

2. The trust instrument doesn't
provide that any amounts are to be paid,
permanently set aside, or used for
charitable purposes; and
3. The trust doesn't distribute
amounts allocated to the corpus of the
trust.

Complex Trust

A complex trust is any trust that doesn't
qualify as a simple trust as explained
above.

Qualified Disability Trust

A qualified disability trust is any
nongrantor trust:
1. Described in 42 U.S.C. 1396p(c)
(2)(B)(iv) and established solely for the
benefit of an individual under 65 years
of age who is disabled, and
2. All the beneficiaries of which are
determined by the Commissioner of
Social Security to have been disabled
for some part of the tax year within the
meaning of 42 U.S.C. 1382c(a)(3).

Pre-need funeral trusts. The
purchasers of pre-need funeral services
are the grantors and the owners of
pre-need funeral trusts established
under state laws. See Rev. Rul. 87-127,
1987-2 C.B. 156. However, the trustees
of pre-need funeral trusts can elect to
file the return and pay the tax for
qualified funeral trusts. For more
information, see Form 1041-QFT, U.S.
Income Tax Return for Qualified Funeral
Trusts.
Nonqualified deferred compensation
plans. Taxpayers may adopt and
maintain grantor trusts in connection
with nonqualified deferred
compensation plans (sometimes
referred to as “rabbi trusts”). Rev. Proc.
92-64, 1992-2 C.B. 422, provides a
“model grantor trust” for use in rabbi
trust arrangements. The procedure also
provides guidance for requesting rulings
on the plans that use these trusts.

A trust will not fail to meet item 2
above just because the trust's corpus
may revert to a person who isn't
disabled after the trust ceases to have
any disabled beneficiaries.

QSSTs. The beneficiary of a qualified
subchapter S trust is treated as the
substantial owner of that portion of the
trust which consists of stock in an S
corporation for which an election under
section 1361(d)(2) has been made. See
QSSTs, earlier.

ESBT (S Portion Only)

Bankruptcy Estate

Grantor Type Trust

For more information, see section
1398 and Pub. 908, Bankruptcy Tax
Guide.

The S portion of an ESBT is the portion
of the trust that consists of S corporation
stock and that isn't treated as owned by
the grantor or another person. See
Electing Small Business Trusts
(ESBTs), earlier, for more information
about an ESBT.

A grantor type trust is a legal trust under
applicable state law that isn't
recognized as a separate taxable entity
for income tax purposes because the
grantor or other substantial owners have
not relinquished complete dominion and
control over the trust.
Generally, for transfers made in trust
after March 1, 1986, the grantor is
treated as the owner of any portion of a
trust in which he or she has a
reversionary interest in either the
income or corpus therefrom, if, as of the
inception of that portion of the trust, the
value of the reversionary interest is
more than 5% of the value of that
portion. Also, the grantor is treated as
holding any power or interest that was
held by either the grantor's spouse at
the time that the power or interest was
created or who became the grantor's
spouse after the creation of that power
or interest. See Grantor Type Trusts,
earlier, for more information.

A chapter 7 or 11 bankruptcy estate is a
separate and distinct taxable entity from
the individual debtor for federal income
tax purposes. See Bankruptcy Estates,
earlier.

Pooled Income Fund

A pooled income fund is a split-interest
trust with a remainder interest for a
public charity and a life income interest
retained by the donor or for another
person. The property is held in a pool
with other pooled income fund property
and doesn't include any tax-exempt
securities. The income for a retained life
interest is figured using the yearly rate
of return earned by the trust. See
section 642(c) and the related
regulations for more information.

B. Number of Schedules
K-1 Attached

Every trust or decedent's estate
claiming an income distribution
deduction on page 1, line 18, must enter
the number of Schedules K-1 (Form
1041) that are attached to Form 1041.

-18-

C. Employer Identification
Number

Every estate or trust that is required to
file Form 1041 must have an EIN. An
EIN may be applied for:
• Online at IRS.gov/EIN. The EIN is
issued immediately once the application
information is validated.
• By mailing or faxing Form SS-4,
Application for Employer Identification
Number.
If the estate or trust hasn't received
its EIN by the time the return is due,
write “Applied for” and the date you
applied in the space for the EIN. For
more details, see Pub. 583, Starting a
Business and Keeping Records.

D. Date Entity Created

Enter the date the trust was created, or,
if a decedent's estate, the date of the
decedent's death.

E. Nonexempt Charitable
and Split-Interest Trusts
Section 4947(a)(1) Trust

Check this box if the trust is a
nonexempt charitable trust within the
meaning of section 4947(a)(1).
A nonexempt charitable trust is a
trust:
• That isn't exempt from tax under
section 501(a);
• In which all of the unexpired interests
are devoted to one or more charitable
purposes described in section 170(c)(2)
(B); and
• For which a deduction was allowed
under section 170 (for individual
taxpayers) or similar Code section for
personal holding companies, foreign
personal holding companies, or estates
or trusts (including a deduction for
estate or gift tax purposes).
Nonexempt charitable trust treated
as a private foundation. If a
nonexempt charitable trust is treated as
though it were a private foundation
under section 509, then the fiduciary
must file Form 990-PF, Return of Private
Foundation, in addition to Form 1041.
If a nonexempt charitable trust is
treated as though it were a private
foundation, and it has no taxable
income under Subtitle A, it may check
the box on Form 990-PF, Part VI-A,
line 15 and enter the tax-exempt interest
received or accrued during the year on
that line, instead of filing Form 1041 to
meet its section 6012 filing requirement
for that tax year.

Instructions for Form 1041 (2021)

Excise taxes. If a nonexempt
charitable trust is treated as a private
foundation, then it is subject to the same
excise taxes under chapters 41 and 42
that a private foundation is subject to. If
the nonexempt charitable trust is liable
for any of these taxes (except the
section 4940 tax), then it reports these
taxes on Form 4720, Return of Certain
Excise Taxes Under Chapters 41 and
42 of the Internal Revenue Code. Taxes
paid by the trust on Form 4720 or on
Form 990-PF (the section 4940 tax)
can't be taken as a deduction on Form
1041.

Not a Private Foundation

Check this box if the nonexempt
charitable trust (section 4947(a)(1)) isn't
treated as a private foundation under
section 509. For more information, see
Regulations section 53.4947-1.
Other returns that must be filed. If a
nonexempt charitable trust isn't treated
as though it were a private foundation,
the fiduciary must file Form 990, Return
of Organization Exempt From Income
Tax, or Form 990-EZ, Short Form
Return of Organization Exempt From
Income Tax, in addition to Form 1041, if
the trust meets the filing requirements
for either of those forms.
If a nonexempt charitable trust isn't
treated as though it were a private
foundation, and it has no taxable
income under Subtitle A, it may answer
“Yes” on Form 990, Part V, line 12a and
enter the tax-exempt interest received
or accrued during the year on Form 990,
Part V, line 12b instead of filing Form
1041 to meet its section 6012 filing
requirement for that tax year (or if Form
990-EZ is filed instead of Form 990, you
may check the box on Form 990-EZ,
line 43 and enter the tax-exempt interest
received or accrued during the year on
that line).

Section 4947(a)(2) Trust

Check this box if the trust is a
split-interest trust described in section
4947(a)(2).
A split-interest trust is a trust that:

• Isn't exempt from tax under section

501(a);
• Has some unexpired interests that
are devoted to purposes other than
religious, charitable, or similar purposes
described in section 170(c)(2)(B); and
• Has amounts transferred in trust after
May 26, 1969, for which a deduction
was allowed under section 170 (for
individual taxpayers) or similar Code
sections for personal holding
companies, foreign personal holding
companies, or estates or trusts
Instructions for Form 1041 (2021)

(including a deduction for estate or gift
tax purposes).
Other returns that must be filed. The
fiduciary of a split-interest trust must file
Form 5227. However, see the
Instructions for Form 5227 for the
exception that applies to split-interest
trusts other than section 664 charitable
remainder trusts.

F. Initial Return, Amended
Return, etc.
Amended Return

If you are filing an amended Form 1041:
• Check the “Amended return” box in
Item F,
• Complete the entire return,
• Correct the appropriate lines with the
new information, and
• Refigure the estate's or trust's tax
liability.
Note. If you are amending the return
for an NOL carryback, also check the
“Net operating loss carryback” box in
Item F.
If the total tax on line 24 is larger on
the amended return than on the original
return, you generally should pay the
difference with the amended return.
However, you should adjust this amount
if there is any increase or decrease in
the total payments shown on line 26.
Attach a sheet that explains the
reason for the amendments and
identifies the lines and amounts being
changed on the amended return.
Amended Schedule H (Form 1040).
If you discover an error on a Schedule H
that you previously filed with Form 1041,
file an “Amended” Form 1041 and
attach a corrected Schedule H.
In the top margin of your corrected
Schedule H, write “CORRECTED” and
the date you discovered the error. Also,
on an attachment explain the reason for
your correction. If you owe tax, pay the
tax in full with your amended Form
1041. If you overpaid tax on a previously
filed Schedule H, depending on whether
you choose the adjustment or claim for
refund process to correct the error, you
must either repay or reimburse the
employee's share of social security and
Medicare tax or get the employee's
consent to the filing of a refund claim for
their share. See Pub. 926, Household
Employer's Tax Guide, for more
information.
Amended Schedule K-1 (Form 1041).
If the amended return results in a
change to income, or a change in
distribution of any income or other
-19-

information provided to a beneficiary, an
amended Schedule K-1 (Form 1041)
must also be filed with the amended
Form 1041 and given to each
beneficiary. Check the “Amended K-1”
box at the top of the amended
Schedule K-1.

Final Return

Check this box if this is a final return
because the estate or trust has
terminated. Also, check the “Final K-1”
box at the top of Schedule K-1.

If, on the final return, there are
excess deductions, an unused capital
loss carryover, or an NOL carryover,
see the instructions for Schedule K-1,
box 11, later.

Change in Trust's Name

If the name of the trust has changed
from the name shown on the prior year's
return (or Form SS-4 if this is the first
return being filed), be sure to check this
box.

Change in Fiduciary

If a different fiduciary enters his or her
name on the line for Name and title of
fiduciary than was shown on the prior
year's return (or Form SS-4 if this is the
first return being filed) and you didn't file
a Form 8822-B, be sure to check this
box. If there is a change in the fiduciary
whose address is used as the mailing
address for the estate or trust after the
return is filed, use Form 8822-B to notify
the IRS.

Change in Fiduciary's Name

If the fiduciary changed his or her name
from the name that he or she entered on
the prior year's return (or Form SS-4 if
this is the first return being filed), be
sure to check this box.

Change in Fiduciary's Address

If the same fiduciary who filed the prior
year's return (or Form SS-4 if this is the
first return being filed) files the current
year's return and changed the address
on the return (including a change to an
"in care of" name and address), and
didn't report the change on Form
8822-B, check this box.
If the address shown on Form 1041
changes after you file the form
(including a change to an "in care of"
name and address), file Form 8822-B to
notify the IRS of the change.

G. Section 645 Election

If a section 645 election was made by
filing Form 8855, check the box in item
G. See Special Rule for Certain
Revocable Trusts under Who Must File

and Form 8855 for more information
about this election.

Income
Determining Qualified Business
Income

The estate's or trust's qualified business
income includes items of income, gain,
deduction, and loss that are effectively
connected with the conduct of a trade or
business within the United States and
included or allowed in determining
taxable income for the year. This
includes the estate's or trust's share of
items of income, gain, deduction, and
loss from trades or business conducted
by partnerships (other than PTPs), S
corporations, and other estates or
trusts. For more information see section
199A, Form 8995 Instructions, and
Form 8995-A Instructions.

Special Rule for Blind Trust

If you are reporting income from a
qualified blind trust (under the Ethics in
Government Act of 1978), don't identify
the payer of any income to the trust but
complete the rest of the return as
provided in the instructions. Also write
“Blind Trust” at the top of page 1.

Extraterritorial Income
Exclusion

The extraterritorial income exclusion
isn't allowed for transactions after 2006.
However, income from certain long-term
sales and leases may still qualify for the
exclusion. For details and to figure the
amount of the exclusion, see Form
8873, Extraterritorial Income Exclusion,
and its separate instructions. The estate
or trust must report the extraterritorial
income exclusion on line 15a of Form
1041, page 1.
Although the extraterritorial income
exclusion is entered on line 15a, it is an
exclusion from income and should be
treated as tax-exempt income when
completing other parts of the return.

Line 1—Interest Income

Report the estate's or trust's share of all
taxable interest income that was
received during the tax year. Examples
of taxable interest include interest from:
• Accounts (including certificates of
deposit and money market accounts)
with banks, credit unions, and thrift
institutions;
• Notes, loans, and mortgages;
• U.S. Treasury bills, notes, and bonds;
• U.S. savings bonds;
• Original issue discount; and

• Income received as a regular interest
holder of a real estate mortgage
investment conduit (REMIC).
For taxable bonds acquired after
1987, amortizable bond premium is
treated as an offset to the interest
income instead of as a separate interest
deduction. See Pub. 550.
For the year of the decedent's death,
Forms 1099-INT issued in the
decedent's name may include interest
income earned after the date of death
that should be reported on the income
tax return of the decedent's estate.
When preparing the decedent's final
income tax return, report on Schedule B
(Form 1040), line 1 the total interest
shown on Form 1099-INT. Under the
last entry on line 1, subtotal all the
interest reported on line 1. Below the
subtotal, write “Form 1041” and the
name and address shown on Form
1041 for the decedent's estate. Also,
show the part of the interest reported on
Form 1041 and subtract it from the
subtotal.

Line 2a—Total Ordinary
Dividends

Report the estate's or trust's share of all
ordinary dividends received during the
tax year.
For the year of the decedent's death,
Forms 1099-DIV issued in the
decedent's name may include dividends
earned after the date of death that
should be reported on the income tax
return of the decedent's estate. When
preparing the decedent's final income
tax return, report on Schedule B (Form
1040), line 5 the ordinary dividends
shown on Form 1099-DIV. Under the
last entry on line 5, subtotal all the
dividends reported on line 5. Below the
subtotal, write “Form 1041” and the
name and address shown on Form
1041 for the decedent's estate. Also,
show the part of the ordinary dividends
reported on Form 1041 and subtract it
from the subtotal.
Report capital gain distributions

TIP on Schedule D (Form 1041),
Line 13.

Line 2b—Qualified Dividends

Enter the beneficiary's allocable share
of qualified dividends on line 2b(1) and
enter the estate's or trust's allocable
share on line 2b(2).
If the estate or trust received qualified
dividends that were derived from IRD,
you must reduce the amount on
line 2b(2) by the portion of the estate tax
deduction claimed on Form 1041,
-20-

page 1, line 19, that is attributable to
those qualified dividends. Don't reduce
the amounts on line 2b by any other
allocable expenses.
Note. The beneficiary's share (as
figured above) may differ from the
amount entered on line 2b of
Schedule K-1 (Form 1041).
Qualified dividends. Qualified
dividends are eligible for a lower tax rate
than other ordinary income. Generally,
these dividends are reported to the
estate or trust in box 1b of Form(s)
1099-DIV. See Pub. 550 for the
definition of qualified dividends if the
estate or trust received dividends not
reported on Form 1099-DIV.
Exception. Some dividends may be
reported to the estate or trust as in
box 1b of Form 1099-DIV but aren't
qualified dividends. These include:
• Dividends received on any share of
stock that the estate or trust held for
less than 61 days during the 121-day
period that began 60 days before the
ex-dividend date. The ex-dividend date
is the first date following the declaration
of a dividend on which the purchaser of
a stock isn't entitled to receive the next
dividend payment. When counting the
number of days the stock was held,
include the day the estate or trust
disposed of the stock but not the day it
acquired the stock. However, you can't
count certain days during which the
estate's or trust's risk of loss was
diminished. See Pub. 550 for more
details.
• Dividends attributable to periods
totaling more than 366 days that the
estate or trust received on any share of
preferred stock held for less than 91
days during the 181-day period that
began 90 days before the ex-dividend
date. When counting the number of
days the stock was held, include the day
the estate or trust disposed of the stock
but not the day it acquired the stock.
However, you can't count certain days
during which the estate's or trust's risk
of loss was diminished. See Pub. 550
for more details. Preferred dividends
attributable to periods totaling less than
367 days are subject to the 61-day
holding period rule above.
• Dividends on any share of stock to
the extent that the estate or trust is
under an obligation (including a short
sale) to make related payments with
respect to positions in substantially
similar or related property.
• Payments in lieu of dividends, but
only if you know or have reason to know

Instructions for Form 1041 (2021)

that the payments are not qualified
dividends.
If you have an entry on

TIP line 2b(2), be sure you use

Schedule D (Form 1041), the
Schedule D Tax Worksheet, or the
Qualified Dividends Tax Worksheet,
whichever applies, to figure the estate's
or trust's tax. Figuring the estate's or
trust's tax liability in this manner will
usually result in a lower tax.

Line 3—Business Income or
(Loss)

If the estate operated a business, report
the income and expenses on
Schedule C (Form 1040), Profit or Loss
From Business. Enter the net profit or
(loss) from Schedule C on line 3.

Line 4—Capital Gain or (Loss)

Enter the gain from Schedule D (Form
1041), Part III, line 19, column (3) or the
loss from Part IV, line 20.
If you deferred a capital gain into a
qualified opportunity fund (QOF), you
must file your return with Schedule D,
Form 8949 and Form 8997 attached.
You will need to file Form 8997 annually
until you dispose of the investment. See
the Form 8997 instructions.

!

CAUTION

Don't substitute Schedule D
(Form 1040) for Schedule D
(Form 1041).

Line 5—Rents, Royalties,
Partnerships, Other Estates
and Trusts, etc.

Use Schedule E (Form 1040),
Supplemental Income and Loss, to
report the estate's or trust's share of
income or (losses) from rents, royalties,
partnerships, S corporations, other
estates and trusts, and REMICs. Also
use Schedule E (Form 1040) to report
farm rental income and expenses based
on crops or livestock produced by a
tenant. Enter the net profit or (loss) from
Schedule E on line 5. See the
Instructions for Schedule E (Form 1040)
for reporting requirements.
If the estate or trust received a
Schedule K-1 from a partnership, S
corporation, or other flow-through entity,
use the corresponding lines on Form
1041 to report the interest, dividends,
capital gains, etc., from the flow-through
entity.

Line 6—Farm Income or (Loss)
If the estate or trust operated a farm,
use Schedule F (Form 1040), Profit or
Loss From Farming, to report farm
income and expenses. Enter the net
Instructions for Form 1041 (2021)

profit or (loss) from Schedule F on
line 6.

section 179 to expense depreciable
business assets.

If an estate or trust has farm
rental income and expenses
CAUTION based on crops or livestock
produced by a tenant, report the income
and expenses on Schedule E (Form
1040). Don't use Form 4835, Farm
Rental Income and Expenses, or
Schedule F (Form 1040) to report such
income and expenses and don't include
the net profit or (loss) from such income
and expenses on line 6.

The estate's or trust's share of
depreciation, depletion, and
amortization is generally reported on the
appropriate lines of Schedule C, E, or F
(Form 1040), the net income or loss
from which is shown on lines 3, 5, or 6
of Form 1041. If the deduction isn't
related to a specific business or activity,
then report it on line 15a.

!

Line 7—Ordinary Gain or (Loss)
Enter from line 17, Form 4797, Sales of
Business Property, the ordinary gain or
loss from the sale or exchange of
property other than capital assets and
also from involuntary conversions (other
than casualty or theft).

Line 8—Other Income

Enter other items of income not included
on lines 1, 2a, and 3 through 7. List the
type and amount on an attached
schedule if the estate or trust has more
than one item.

Items to be reported on line 8 include
the following.
• Unpaid compensation received by
the decedent's estate that is IRD.
• Any part of a total distribution shown
on Form 1099-R, Distributions From
Pensions, Annuities, Retirement or
Profit-Sharing Plans, IRAs, Insurance
Contracts, etc., that is treated as
ordinary income. For more information,
see Form 4972, Tax on Lump-Sum
Distributions, and its instructions.
• Taxable contributions received during
the tax year by an Alaska Native
Settlement Trust from an Alaska Native
Corporation. Report gain from taxable
contributions of non-cash property on
Schedule D (Form 1041).
Note. Beginning in tax year 2021, there
is no current year 965(a) income
inclusion reported on line 8. However,
see the instructions for Schedule G, Part
I, line 8, later, for information about a
triggering event for a section 965(i) net
tax liability.

Deductions
Depreciation, Depletion, and
Amortization

A trust or decedent's estate is allowed a
deduction for depreciation, depletion,
and amortization only to the extent the
deductions aren't apportioned to the
beneficiaries. An estate or trust isn't
allowed to make an election under
-21-

Depreciation. For a decedent's estate,
the depreciation deduction is
apportioned between the estate and the
heirs, legatees, and devisees on the
basis of the estate's income allocable to
each.
For a trust, the depreciation
deduction is apportioned between the
income beneficiaries and the trust on
the basis of the trust income allocable to
each, unless the governing instrument
(or local law) requires or permits the
trustee to maintain a depreciation
reserve. If the trustee is required to
maintain a reserve, the deduction is first
allocated to the trust, up to the amount
of the reserve. Any excess is allocated
among the income beneficiaries and the
trust in the same manner as the trust's
accounting income. See Regulations
section 1.167(h)-1(b).
Depletion. For mineral or timber
property held by a decedent's estate,
the depletion deduction is apportioned
between the estate and the heirs,
legatees, and devisees on the basis of
the estate's income from such property
allocable to each.
For mineral or timber property held in
trust, the depletion deduction is
apportioned between the income
beneficiaries and the trust based on the
trust income from such property
allocable to each, unless the governing
instrument (or local law) requires or
permits the trustee to maintain a reserve
for depletion. If the trustee is required to
maintain a reserve, the deduction is first
allocated to the trust, up to the amount
of the reserve. Any excess is allocated
among the beneficiaries and the trust in
the same manner as the trust's
accounting income. See Regulations
section 1.611-1(c)(4).
Amortization. The deduction for
amortization is apportioned between an
estate or trust and its beneficiaries
under the same principles used to
apportion the deductions for
depreciation and depletion.
The deduction for the amortization of
reforestation expenditures under
section 194 is allowed only to an estate.

Allocable share from a pass-through
entity. Depreciation, depletion, and
amortization received from a
pass-through entity on a Schedule K-1
is apportioned and reported in the same
manner as discussed above. A section
179 expense received from a
pass-through entity on a Schedule K-1
isn't deductible by the estate or trust.

Allocation of Deductions for
Tax-Exempt Income

Generally, no deduction that would
otherwise be allowable is allowed for
any expense (whether for business or
for the production of income) that is
allocable to tax-exempt income.
Examples of tax-exempt income
include:
• Certain death benefits (section 101),
• Interest on state or local bonds
(section 103),
• Compensation for injuries or sickness
(section 104), and
• Income from discharge of
indebtedness in a title 11 case (section
108).
Exception. State income taxes and
business expenses that are allocable to
tax-exempt interest are deductible.
Expenses that are directly allocable
to tax-exempt income are allocated only
to tax-exempt income. A reasonable
proportion of expenses indirectly
allocable to both tax-exempt income
and other income must be allocated to
each class of income.

Deductions That May Be
Allowable for Estate Tax
Purposes

Administration expenses and casualty
and theft losses deductible on Form 706
may be deducted, to the extent
otherwise deductible for income tax
purposes, on Form 1041 if the fiduciary
files a statement waiving the right to
deduct the expenses and losses on
Form 706. The statement must be filed
before the expiration of the statutory
period of limitations for the tax year the
deduction is claimed. See Pub. 559 for
more information.

Accrued Expenses

Generally, an accrual basis taxpayer
can deduct accrued expenses in the tax
year that (a) all events have occurred
that determine the liability; and (b) the
amount of the liability can be figured
with reasonable accuracy. However, all
the events that establish liability are
treated as occurring only when
economic performance takes place.

There are exceptions for recurring
items. See section 461(h).

Limitations on Deductions
At-Risk Loss Limitations

Generally, the amount the estate or trust
has “at-risk” limits the loss it can deduct
for any tax year. Use Form 6198,
At-Risk Limitations, to figure the
deductible loss for the year and file it
with Form 1041. For more information,
see Pub. 925, Passive Activity and
At-Risk Rules.

Passive Activity Loss and
Credit Limitations
In general. Section 469 and the
regulations thereunder generally limit
losses from passive activities to the
amount of income derived from all
passive activities. Similarly, credits from
passive activities are generally limited to
the tax attributable to such activities.
These limitations are first applied at the
estate or trust level.
Generally, an activity is a passive
activity if it involves the conduct of any
trade or business, and the taxpayer
does not materially participate in the
activity. Passive activities don't include
working interests in oil and gas
properties. See section 469(c)(3).
Note. Material participation standards
for estates and trusts haven't been
established by regulations.
For a grantor trust, material
participation is determined at the
grantor level.
If the estate or trust distributes an
interest in a passive activity, the basis of
the property immediately before the
distribution is increased by the passive
activity losses allocable to the interest,
and such losses can't be deducted. See
section 469(j)(12).
Losses from passive activities

TIP are first subject to the at-risk

rules. When the losses are
deductible under the at-risk rules, the
passive activity rules then apply.
Rental activities. Generally, rental
activities are passive activities, whether
or not the taxpayer materially
participates. However, certain taxpayers
who materially participate in real
property trades or businesses aren't
subject to the passive activity limitations
on losses from rental real estate
activities in which they materially
participate. For more details, see
section 469(c)(7).
-22-

For tax years of an estate ending less
than 2 years after the decedent's date of
death, up to $25,000 of deductions and
deduction equivalents of credits from
rental real estate activities in which the
decedent actively participated are
allowed. Any excess losses or credits
are suspended for the year and carried
forward.
Portfolio income. Portfolio income
isn't treated as income from a passive
activity, and passive losses and credits
generally may not be applied to offset it.
Portfolio income generally includes
interest, dividends, royalties, and
income from annuities. Portfolio income
of an estate or trust must be accounted
for separately.
Forms to file. See Form 8582, Passive
Activity Loss Limitations, to figure the
amount of losses allowed from passive
activities. See Form 8582-CR, Passive
Activity Credit Limitations, to figure the
amount of credit allowed for the current
year.

Business Interest

Business interest expense could be
limited. For more information about
limitations on deductions for business
interest, see section 163(j) and
Line 10—Interest, later.

Transactions Between Related
Taxpayers

Under section 267, a trust that uses the
accrual method of accounting may only
deduct business expenses and interest
owed to a related party in the year the
payment is included in the income of the
related party. For this purpose, a related
party includes:
1. A grantor and a fiduciary of any
trust;
2. A fiduciary of a trust and a
fiduciary of another trust, if the same
person is a grantor of both trusts;
3. A fiduciary of a trust and a
beneficiary of such trust;
4. A fiduciary of a trust and a
beneficiary of another trust, if the same
person is a grantor of both trusts;
5. A fiduciary of a trust and a
corporation more than 50% in value of
the outstanding stock of which is
owned, directly or indirectly, by or for
the trust or by or for a person who is a
grantor of the trust; and
6. An executor of an estate and a
beneficiary of that estate, except for a
sale or exchange to satisfy a pecuniary
bequest (that is, a bequest of a sum of
money).
Instructions for Form 1041 (2021)

Line 10—Interest

Enter the amount of interest (subject to
limitations) paid or incurred by the
estate or trust on amounts borrowed by
the estate or trust, or on debt acquired
by the estate or trust (for example,
outstanding obligations from the
decedent) that isn't claimed elsewhere
on the return.

If the proceeds of a loan were used
for more than one purpose (for example,
to purchase a portfolio investment and
to acquire an interest in a passive
activity), the fiduciary must make an
interest allocation according to the rules
in Temporary Regulations section
1.163-8T.
Don't include interest paid on
indebtedness incurred or continued to
purchase or carry obligations on which
the interest is wholly exempt from
income tax.
Personal interest isn't deductible.
Examples of personal interest include
interest paid on:
• Revolving charge accounts used to
purchase personal use property;
• Personal notes for money borrowed
from a bank, credit union, or other
person;
• Installment loans on personal use
property; and
• Underpayments of federal, state, or
local income taxes.
Interest that is paid or incurred on
indebtedness allocable to a trade or
business (including a rental activity)
should be deducted on the appropriate
line of Schedule C, E, or F (Form 1040),
the net income or loss from which is
shown on line 3, 5, or 6 of Form 1041.
Types of interest to include on line 10
are:
1. Any investment interest (subject
to limitations—see below);
2. Any qualified residence interest
(see later); and
3. Any interest payable under
section 6601 on any unpaid portion of
the estate tax attributable to the value of
a reversionary or remainder interest in
property for the period during which an
extension of time for payment of such
tax is in effect.
Limitation on deduction of business
interest. Business interest expense is
limited to the sum of business interest
income, 30% of the adjusted taxable
income and floor plan financing interest.
Business interest expense includes any
interest paid or accrued on
indebtedness properly allocable to a
Instructions for Form 1041 (2021)

trade or business. A taxpayer, other
than a tax shelter, that meets the gross
receipts test is not required to limit
business interest expense under section
163(j). A taxpayer meets the gross
receipts test if the taxpayer has average
annual gross receipts of $26 million or
less for the 3 prior tax years. Gross
receipts include the aggregate gross
receipts from all persons treated as a
single employer such as a controlled
group of corporations, commonly
controlled partnerships or
proprietorships, and affiliated service
groups. If the taxpayer fails to meet the
gross receipts test, Form 8990,
Limitation on Business Interest Expense
Under Section 163(j), is generally
required.
Investment interest. Generally,
investment interest is interest (including
amortizable bond premium on taxable
bonds acquired after October 22, 1986,
but before January 1, 1988) that is paid
or incurred on indebtedness that is
properly allocable to property held for
investment. Investment interest doesn't
include any qualified residence interest,
or interest that is taken into account
under section 469 in figuring income or
loss from a passive activity.
Generally, net investment income is
the excess of investment income over
investment expenses. Investment
expenses (other than interest) are
deductible only to the extent they are
allowable under section 67(e).
The amount of the investment
interest deduction may be limited. Use
Form 4952, Investment Interest
Expense Deduction, to figure the
allowable investment interest deduction.
If you must complete Form 4952,
check the box on line 10 of Form 1041
and attach Form 4952. Then, add the
deductible investment interest to the
other types of deductible interest and
enter the total on line 10.
Qualified residence interest. Interest
paid or incurred by an estate or trust on
indebtedness secured by a qualified
residence of a beneficiary of an estate
or trust is treated as qualified residence
interest if the residence would be a
qualified residence (that is, the principal
residence or the secondary residence
selected by the beneficiary) if owned by
the beneficiary. The beneficiary must
have a present interest in the estate or
trust or an interest in the residuary of the
estate or trust. See Pub. 936, Home
Mortgage Interest Deduction, for an
explanation of the general rules for
deducting home mortgage interest.
-23-

See section 163(h)(3) for a definition
of qualified residence interest and for
limitations on indebtedness.
Qualified mortgage insurance premiums. Enter (on the worksheet later) the
qualified mortgage insurance premiums
paid under a mortgage insurance
contract issued after December 31,
2006, in connection with qualified
residence acquisition debt that was
secured by a principal or secondary
residence. See Prepaid mortgage
insurance later if the estate or trust paid
any premiums allocable after 2021. If at
least one other person was liable for
and paid the premiums in connection
with the loan, and the premiums were
reported on Form 1098, Mortgage
Interest Statement, include the estate's
or trust's share of the 2021 premiums on
the worksheet later.
Qualified mortgage insurance is
mortgage insurance provided by the
Department of Veterans Affairs, the
Federal Housing Administration, or the
Rural Housing Service (or their
successor organizations), and private
mortgage insurance (as defined in
section 2 of the Homeowners Protection
Act of 1998 as in effect on December
20, 2006).
Mortgage insurance provided by the
Department of Veterans Affairs and the
Rural Housing Service is commonly
known as a funding fee and guarantee
fee, respectively. These fees can be
deducted fully in 2021 if the mortgage
insurance contract was issued in 2021.
Contact the mortgage insurance issuer
to determine the deductible amount if it
is not included in box 5 of Form 1098.
Prepaid mortgage insurance. If
the estate or trust paid mortgage
insurance premiums allocable to
periods after 2021, such premiums must
be allocated over the shorter of:
• The stated term of the mortgage, or
• 84 months, beginning with the month
the insurance was obtained.
The premiums are treated as paid in
the year to which they are allocated. If
the mortgage is satisfied before its term,
no deduction is allowed for the
unamortized balance. See Pub. 936 for
details. These allocation rules do not
apply to qualified mortgage insurance
provided by the Department of Veterans
Affairs or the Rural Housing Service (or
their successor organizations).
Limit on the amount that is
deductible. The estate or trust cannot
deduct mortgage insurance premiums if
the estate's or trust's AGI is more than
$109,000. If the estate's or trust's AGI is

Qualified Mortgage Insurance Premiums Deduction Worksheet

Keep for Your Records

1.

Enter the total premiums the estate or trust paid in 2021 for qualified mortgage insurance for a contract issued after
December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

Enter the estate's or trust's AGI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

3.

Enter $100,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.

4.

Is the amount on line 2 more than the amount on line 3?
No.

The deduction is not limited. Include the amount from line 1 above on Form 1041,
line 10. Don’t complete the rest of this worksheet.

Yes.

Subtract line 3 from line 2. If the result is not a multiple of $1,000, increase it to the next
multiple of $1,000. For example, increase $425 to $1,000, increase $2,025 to $3,000,
etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.

4.

5.

Divide line 4 by $10,000. Enter the result as a decimal. If the result is 1.0 or more, enter 1.0 . . . . . . . . . . . . . . . . . . . . . .

5.    .

6.

Multiply line 1 by line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.

7.

Qualified mortgage insurance premiums deduction. Subtract line 6 from line 1. Enter the result here and include the
amount on Form 1041, line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.

more than $100,000, its deduction is
limited and you must use the Qualified
Mortgage Insurance Premiums
Deduction Worksheet above to figure
the deduction. See Adjusted gross
income (AGI), later, for information on
figuring AGI.

Line 11—Taxes
The deduction for state and
local taxes is limited to $10,000.
CAUTION The limitation applies to the total
of your state and local income taxes (or
general sales taxes, if elected instead of
income taxes), real estate taxes, and
personal property taxes. The limitation
does not apply to foreign income taxes,
and state and local taxes paid or
accrued in carrying on a trade or
business or for the production of
income.

!

Enter any deductible taxes paid or
incurred during the tax year that aren't
deductible elsewhere on Form 1041.
Deductible taxes include the following:
• State and local income taxes. You
can deduct state and local income taxes
unless you elect to deduct state and
local general sales taxes. You can't
deduct both.
• State and local general sales taxes.
You can elect to deduct state and local
general sales taxes instead of state and
local income taxes. Generally, you can
elect to deduct the actual state and local
general sales taxes (including
compensating use taxes) you paid in
2021 if the tax rate was the same as the
general sales tax rate. However, sales
taxes on food, clothing, medical
supplies, and motor vehicles are
deductible as a general sales tax even if

the tax rate was less than the general
sales tax rate. Sales taxes on motor
vehicles are also deductible as a
general sales tax if the tax rate was
more than the general sales tax rate, but
the tax is deductible only up to the
amount of tax that would have been
imposed at the general sales tax rate.
Motor vehicles include cars,
motorcycles, motor homes, recreational
vehicles, sport utility vehicles, trucks,
vans, and off-road vehicles. Also
include any state and local general
sales taxes paid for a leased motor
vehicle.
Do not include sales taxes paid on
items used in a trade or business. An
estate or trust cannot use the Optional
Sales Tax Tables for individuals in the
Instructions for Schedule A (Form
1040), Itemized Deductions, to figure its
deduction.
• State and local real property taxes.
Note. The deduction for foreign real
property taxes is no longer allowed.
• State and local personal property
taxes.
• Foreign or U.S. possession income
taxes. You may want to take a credit for
the tax instead of a deduction. See the
instructions for Schedule G, Part I,
line 2a, later, for more details.
• The generation-skipping transfer
(GST) tax imposed on income
distributions.
Don't deduct:
• Federal income taxes;
• Estate, inheritance, legacy,
succession, and gift taxes;
• Federal duties and excise taxes; or
• Foreign real property taxes.
-24-

Safe harbor for certain charitable
contributions made in exchange for
a state or local tax credit. If you
made a charitable contribution in
exchange for a state or local tax credit
and your charitable contribution
deduction must be reduced as a result
of receiving or expecting to receive the
tax credit, you may qualify for a safe
harbor that allows you to treat some or
all of the disallowed charitable
contribution as a payment of state and
local taxes. The safe harbor applies if
you meet the following conditions.
1. You made a cash contribution to
an entity described in section 170(c).
2. In return for the cash contribution,
you received a state or local tax credit.
3. You must reduce your charitable
contribution deduction by the amount of
the state or local tax credit you receive.
If you meet these conditions, and to the
extent you apply the state or local tax
credit to this or a prior year's state or
local tax liability, you may include this
amount on line 11. To the extent you
apply a portion of the credit to offset
your state or local tax liability in a
subsequent year (as permitted by law),
you may treat this amount as state or
local tax paid in the year the credit is
applied. For more information about this
safe harbor and examples, see Notice
2019-12.

Line 12—Fiduciary Fees

Enter the deductible fees paid or
incurred to the fiduciary for
administering the estate or trust during
the tax year.

Instructions for Form 1041 (2021)

Fiduciary expenses include probate
court fees and costs, fiduciary bond
premiums, legal publication costs of
notices to creditors or heirs, the cost of
certified copies of the decedent's death
certificate, and costs related to fiduciary
accounts.
Fiduciary fees deducted on
TIP Form 706 can't be deducted on
Form 1041.
Note. Fiduciary fees are allowable
under section 67(e) if they are costs that
are paid or incurred in connection with
the administration of an estate or a
non-grantor trust that would not have
been incurred if the property were not
held in such estate or trust. See Final
Regulation - TD9918 and Regulations
section 1.67-4 for more information.

Line 14—Attorney, Accountant,
and Return Preparer Fees

Expenses for preparation of fiduciary
income tax returns, the decedent's final
individual income tax returns, and all
estate and generation-skipping transfer
tax returns are fully deductible.
However, expenses for preparing all
other tax returns, including gift tax
returns, are considered costs commonly
and customarily incurred by individuals
and are not deductible. For more
information, see Final Regulations TD9918 and Regulations section
1.67-4.

Line 15a—Other Deductions

Attach your own statement, listing by
type and amount all allowable
deductions that aren't deductible
elsewhere on Form 1041.
Allowable deductions include all
deductions listed in section 67(b)
(including estate taxes attributable to
IRD under section 691(c)), and other
costs allowable under section 67(e)
paid or incurred in connection with the
administration of the estate or trust that
would not have been incurred if the
property were not held in the estate or
trust.
Don't include any losses on
worthless bonds and similar obligations
and nonbusiness bad debts. Report
these losses as applicable on Form
8949, Sales and Other Dispositions of
Capital Assets.
Don't deduct medical or funeral
expenses on Form 1041. Medical
expenses of the decedent paid by the
estate may be deductible on the
decedent's income tax return for the
year incurred. See section 213(c).

Instructions for Form 1041 (2021)

Funeral expenses are deductible only
on Form 706.
Other costs paid or incurred by estates and non-grantor trusts. Under
section 67(e), deductions are allowable
for costs which are paid or incurred by
an estate or non-grantor trust in
connection with the administration of the
estate or trust and would not have been
incurred if the property were not held in
such trust or estate.
In determining whether a cost is
deductible by an estate or non-grantor
trust it must be determined whether the
cost would be “commonly or
customarily” incurred by a hypothetical
individual owning the same property. If
the cost would be deductible by a
hypothetical individual, it is not
deductible by the estate or non-grantor
trust.
It is the type of product or service
rendered to the estate or non-grantor
trust in exchange for the cost, rather
than the description of the cost of that
product or service that is determinative.
Costs that are incurred commonly or
customarily by individuals include costs
incurred in defense of a claim against
the estate, the decedent, or the
non-grantor trust that are unrelated to
the existence, validity, or administration
of the estate or trust. These amounts
are not allowable deductions.
Ownership costs. Ownership costs
are costs that are chargeable to or
incurred by an owner of property simply
by reason of being the owner of the
property. These costs are commonly or
customarily incurred by a hypothetical
individual owner of such property and
are not deductible by an estate or
non-grantor trust. Under section 67(b),
they include, but are not limited to,
condominium fees, insurance
premiums, maintenance and lawn
services, automobile registration and
insurance costs, and partnership costs
deemed to be passed through to and
reportable by a partner. Other expenses
incurred merely by reason of the
ownership of property may be fully
deductible under other provisions of the
Code.
Appraisal fees. Appraisal fees
incurred to determine the fair market
value of assets as of the decedent's
date of death (or the alternate valuation
date), to determine value for purposes
of making distributions, or as otherwise
required to properly prepare the estate's
or trust's tax returns, or a
generation-skipping transfer tax return,
are not incurred commonly or
-25-

customarily by an individual and are
deductible. The cost of appraisals for
other purposes (for example, insurance)
is commonly or customarily incurred by
individuals and is not an allowable
deduction.
Investment advisory fees. Fees for
investment advice, including any related
services that would be provided to any
individual investor as part of an
investment advisory fee, are incurred
commonly or customarily by a
hypothetical individual investor and are
not deductible. However, certain
incremental costs of investment advice
beyond the amount that normally would
be charged to an individual investor are
deductible.
An incremental cost is a special,
additional charge that is added solely
because the investment advice is
rendered to a trust or estate rather than
to an individual, including balancing
beyond the usual varying interests of
current beneficiaries and
remaindermen. The deductible portion
of the investment advisory fees is
limited to the amount of those fees, if
any, that exceeds the fees normally
charged to an individual investor. See
Regulations section 1.67-4(b)(4).
Bundled fees. If an estate or
non-grantor trust pays a single fee,
commission, or other expense, such as
a fiduciary's commission, attorney's fee,
or accountant's fee for both costs that
are incurred commonly or customarily
by individuals and costs (other than a de
minimis amount) that are not incurred
commonly or customarily by individuals,
then (except to the extent provided
otherwise by guidance published in the
Internal Revenue Bulletin) the single
fee, commission, or other expense
(bundled fee) must be allocated
between the costs that are incurred
commonly or customarily by individuals,
such costs not being deductible, and
costs that are not incurred commonly or
customarily by individuals, such costs
being deductible.
There is an exception to the
allocation rule if a bundled fee is not
computed on an hourly basis. In this
situation, only the portion of that fee that
is attributable to investment advice is
not deductible. The remaining portion is
deductible.
Out-of-pocket expenses billed to the
estate or non-grantor trust are treated
as separate from the bundled fee and
are not subject to allocation.
Estates and non-grantor trusts
cannot deduct payments made from the

bundled fee to third parties if such
payments would not have been
deductible if they had been paid directly
by the estate or non-grantor trust.
Any reasonable method may be used
to allocate a bundled fee, including
without limitation the allocation of a
portion of a fiduciary commission that is
a bundled fee to investment advice. For
more information, see Regulations
section 1.67-4(c)(4).
Note. The reasonable method
standard does not apply to determine
the portion of the bundled fee
attributable to payments made to third
parties for commonly or customarily
incurred by an individual or to any other
separately assessed expense
commonly or customarily incurred by an
individual, because those payments and
expenses are readily identifiable without
any discretion on the part of the
fiduciary or return preparer.
For more information, see
Regulations 1.67-4.

Other deductions reported on
line 15a.
Bond premium(s). For taxable bonds
acquired before October 23, 1986, if the
fiduciary elected to amortize the
premium, report the amortization on this
line. If you made the election to amortize
the premium, the basis in the taxable
bond must be reduced by the amount of
amortization.
For tax-exempt bonds, you can't
deduct the premium that is amortized.
Although the premium can't be
deducted, you must amortize the
tax-exempt bond by the amount of
premium amortized.
For more information, see section
171 and Pub. 550.
If you claim a bond premium
deduction for the estate or trust, figure
the deduction on a separate sheet and
attach it to Form 1041.
Casualty and theft losses. Use Form
4684, Casualties and Thefts, to figure
any deductible casualty and theft
losses.
Estate's or trust's share of amortization, depreciation, and depletion not
claimed elsewhere. If you can't
deduct the estate's or trust's
apportioned share of amortization,
depreciation, and depletion as rent or
royalty expenses on Schedule E (Form
1040), or as business or farm expenses
on Schedule C, or F (Form 1040),
itemize the estate's or trust's
apportioned share of the deductions on

an attached sheet and include them on
line 15a.
Note. Don't report the beneficiary's
apportioned share of depreciation,
depletion, and amortization on line 15a.
Report the beneficiary's apportioned
share of deductions on Schedule K-1
(Form 1041), box 9.
Itemize each beneficiary's
apportioned share of the deductions
and report them in the appropriate box
of Schedule K-1 (Form 1041).

Line 15b—Net Operating Loss
Deduction

An estate or trust is allowed a net
operating loss deduction (NOLD) under
section 172.
If you claim an NOLD for the estate
or trust, figure the deduction on a
separate sheet and attach it to the
return.

Line 18—Income Distribution
Deduction

If the estate or trust was required to
distribute income currently or if it paid,
credited, or was required to distribute
any other amounts to beneficiaries
during the tax year, complete
Schedule B to determine the estate's or
trust's income distribution deduction.
However, if you are filing for a pooled
income fund, don't complete
Schedule B. Instead, attach a statement
to support the computation of the
income distribution deduction. For more
information, see Pooled Income Funds,
earlier.

If the estate or trust claims an income
distribution deduction, complete and
attach:
• Part I (through line 24) and Part II of
Schedule I (Form 1041) to refigure the
deduction on a minimum tax basis, and
• Schedule K-1 (Form 1041) for each
beneficiary to which a distribution was
made or required to be made.
Cemetery perpetual care fund. On
line 18, deduct the amount, not more
than $5 per gravesite, paid for
maintenance of cemetery property. To
the right of the entry space for line 18,
enter the number of gravesites. Also
write “Section 642(i) trust” in
parentheses after the trust's name at the
top of Form 1041. You don't have to
complete Schedules B of Form 1041
and K-1 (Form 1041).
Don't enter less than zero on line 18.

-26-

Line 19—Estate Tax Deduction
(Including Certain
Generation-Skipping Transfer
Taxes)

If the estate or trust includes IRD in its
gross income, and such amount was
included in the decedent's gross estate
for estate tax purposes, the estate or
trust is allowed to deduct in the same
tax year that the income is included that
portion of the estate tax imposed on the
decedent's estate that is attributable to
the inclusion of the IRD in the
decedent's estate. For an example of
the computation, see Regulations
section 1.691(c)-1 and Pub. 559.
If any amount properly paid, credited,
or required to be distributed by an
estate or trust to a beneficiary consists
of IRD received by the estate or trust,
don't include such amounts in
determining the estate tax deduction for
the estate or trust. Figure the deduction
on a separate sheet. Attach the sheet to
your return.
If you claim a deduction for
estate tax attributable to
CAUTION qualified dividends or capital
gains, you may have to adjust the
amount on Form 1041, page 1,
line 2b(2), or Schedule D (Form 1041),
line 22.

!

Also, a deduction is allowed for the
GST tax imposed as a result of a
taxable termination or a direct skip
occurring as a result of the death of the
transferor. See section 691(c)(3). Enter
the estate's or trust's share of these
deductions on line 19.

Line 20—Qualified Business
Income Deduction

To figure your Qualified Business
Income Deduction, use Form 8995,
Qualified Business Income Deduction
Simplified Computation, or Form
8995-A, Qualified Business Income
Deduction, as applicable.

Use Form 8995 if:
• You have qualified business income
(loss), REIT dividends, or PTP income
(loss),
• Your 2021 taxable income before the
qualified business income deduction is
less than or equal to $164,900, and
• You aren’t a patron in a specified
agricultural or horticultural cooperative.
If you don’t meet these requirements,
use Form 8995-A. Attach whichever
form you use (Form 8995 or 8995-A) to
your return. Also attach Schedules C, E,
or F (Form 1040), whichever form you
Instructions for Form 1041 (2021)

use to report information about your
qualified business income. See the
instructions for Forms 8995 and 8995-A
for more information for figuring and
reporting your QBI deduction.
Note. Report the beneficiary’s
apportioned share of items of qualified
business income (loss) subject to
beneficiary specific determinations, W-2
wages, unadjusted basis immediately
after acquisition (UBIA) of qualified
property, qualified REIT dividends, and
qualified publicly traded partnership
income on a statement attached to
Schedule K-1 (Form 1041). See the
Instructions for Schedule K-1 (Form
1041), box 14, code I, later.

Line 21—Exemption
Decedents' estates. A decedent's
estate is allowed a $600 exemption.
Trusts required to distribute all income currently. A trust whose
governing instrument requires that all
income be distributed currently is
allowed a $300 exemption, even if it
distributed amounts other than income
during the tax year.
Qualified disability trusts. A qualified
disability trust is allowed a $4,300
exemption. This amount is not subject to
phaseout.
A qualified disability trust is any trust:
1. Described in 42 U.S.C. 1396p(c)
(2)(B)(iv) and established solely for the
benefit of an individual under 65 years
of age who is disabled, and
2. All of the beneficiaries of which
are determined by the Commissioner of
Social Security to have been disabled
for some part of the tax year within the
meaning of 42 U.S.C. 1382c(a)(3).
A trust will not fail to meet item 2
above just because the trust's corpus
may revert to a person who isn't
disabled after the trust ceases to have
any disabled beneficiaries.
All other trusts. A trust not described
above is allowed a $100 exemption.

Tax and Payments
Line 23—Taxable Income
Minimum taxable income. Line 23
can't be less than the larger of:
• The inversion gain of the estate or
trust, as figured under section 7874, if
the estate or trust is an expatriated
entity or a partner in an expatriated
entity, or
• The sum of the excess inclusions of
the estate or trust from Schedule Q
Instructions for Form 1041 (2021)

(Form 1066), Quarterly Notice to
Residual Interest Holder of REMIC
Taxable Income or Net Loss Allocation,
line 2c.
Net operating loss (NOL). If line 23
(figured without regard to the minimum
taxable income rule stated above) is a
loss, the estate or trust may have an
NOL. Don't include the deductions
claimed on lines 13, 18, and 21 when
figuring the amount of the NOL.
Generally, an NOL can only be
carried forward to subsequent years
and cannot be carried back. The 2-year
carryback period only applies to the
portion of an NOL attributable to a
farming loss. For more information, see
Pub. 536, Net Operating Losses (NOLs)
for Individuals, Estates, and Trusts.
Complete Schedule A of Form 1045
to figure the amount of the NOL that is
available for carryback or carryover.
Use Form 1045 or file an amended
return to apply for a refund based on an
NOL carryback. For more information,
see the Instructions for Form 1045,
Application for Tentative Refund.
On the termination of the estate or
trust, any unused NOL carryover that
would be allowable to the estate or trust
in a later tax year, but for the
termination, is allowed to the
beneficiaries succeeding to the property
of the estate or trust. See the
instructions for Schedule K-1 (Form
1041), box 11, codes E and F, later.
Excess deductions on termination. If
the estate or trust has for its final year
deductions (excluding the charitable
deduction and personal exemption) in
excess of its gross income, the excess
deductions are allowed to the
beneficiaries succeeding to the property
of the estate or trust and retain their
separate character as an amount
allowed in arriving at adjusted gross
income, a non-miscellaneous itemized
deduction, or a miscellaneous itemized
deduction. In general, an unused NOL
carryover that is allowed to beneficiaries
(as explained above) can't also be
treated as an excess deduction.
However, if the final year of the estate or
trust is also the last year of the NOL
carryover period, the NOL carryover not
absorbed in that tax year by the estate
or trust is included as an excess
deduction. See the instructions for
Schedule K-1 (Form 1041), box 11,
codes A and B, later.

-27-

Line 25—Current Payment on
Deferred Net 965 Tax Liability

If you made a payment with respect to a
current net 965 tax liability, enter the
amount of the payment from Form
965-A, Part II, column (k).

Line 27—Estimated Tax Penalty

If line 28 is at least $1,000 and more
than 10% of the tax shown on Form
1041, or the estate or trust underpaid its
2021 estimated tax liability for any
payment period, it may owe a penalty.
See Form 2210 to determine whether
the estate or trust owes a penalty and to
figure the amount of the penalty.
Note. The penalty may be waived or
reduced under certain conditions. See
Pub. 505, Tax Withholding and
Estimated Tax, and the Instructions for
Form 2210 for details.

Line 28—Tax Due

You must pay the tax in full when the
return is filed. You may pay by EFTPS.
For more information about EFTPS, see
Electronic Deposits, earlier. Also, you
may pay by check or money order or by
credit or debit card.
To pay by check or money order.
If you pay by check or money order:
• Make it payable to “United States
Treasury”,
• Make sure the name of the estate or
trust appears on the payment,
• Write the estate’s or trust’s EIN and
“2021 Form 1041” on the payment,
• Consider completing the 2021 Form
1041-V, and
• Enclose, but don't attach, the
payment (and Form 1041-V, if
completed) with Form 1041.
Note. The IRS can't accept a single
check (including a cashier's check) for
amounts of $100,000,000 ($100 million)
or more. If you're sending $100 million
or more by check, you'll need to spread
the payments over two or more checks
with each check made out for an
amount less than $100 million. The
$100 million or more amount limit
doesn't apply to other methods of
payment (such as electronic payments),
so please consider paying by means
other than checks.
To pay by credit or debit card.
For information on paying your taxes
electronically, including by credit or
debit card, go to IRS.gov/E-pay.

Line 30a—Credited to 2022
Estimated Tax

Enter the amount from line 29 that you
want applied to the estate's or trust's
2022 estimated tax.

Schedule A—Charitable
Deduction
General Instructions

Generally, any part of the gross income
of an estate or trust (other than a simple
trust) that, under the terms of the will or
governing instrument, is paid (or treated
as paid) during the tax year for a
charitable purpose specified in section
170(c) is allowed as a deduction to the
estate or trust. It isn't necessary that the
charitable organization be created or
organized in the United States.
A pooled income fund or a section
4947(a)(1) nonexempt charitable trust
treated as a private foundation must
attach a separate sheet to Form 1041
instead of using Schedule A of Form
1041 to figure the charitable deduction.

Additional return to be filed by
trusts. Trusts, other than split-interest
trusts or nonexempt charitable trusts,
that claim a charitable deduction also
file Form 1041-A unless the trust is
required to distribute currently to the
beneficiaries all the income for the year
determined under section 643(b) and
related regulations.
Pooled income funds and charitable
lead trusts also file Form 5227. See
Form 5227 for information about any
exceptions.
Election to treat contributions as
paid in the prior tax year. The
fiduciary of an estate or trust may elect
to treat as paid during the tax year any
amount of gross income received during
that tax year or any prior tax year that
was paid in the next tax year for a
charitable purpose.
For example, if a calendar year
estate or trust makes a qualified
charitable contribution on February 7,
2022, from income earned in 2021 or
prior, then the fiduciary can elect to treat
the contribution as paid in 2021.
To make the election, the fiduciary
must file a statement with Form 1041 for
the tax year in which the contribution is
treated as paid. This statement must
include:
1. The name and address of the
fiduciary;
2. The name of the estate or trust;

3. An indication that the fiduciary is
making an election under section 642(c)
(1) for contributions treated as paid
during such tax year;
4. The name and address of each
organization to which any such
contribution is paid; and
5. The amount of each contribution
and date of actual payment or, if
applicable, the total amount of
contributions paid to each organization
during the next tax year, to be treated as
paid in the prior tax year.
The election must be filed by the due
date (including extensions) for Form
1041 for the next tax year. If the original
return was filed on time, you may make
the election on an amended return filed
no later than 6 months after the due
date of the return (excluding
extensions). Write “Filed pursuant to
section 301.9100-2” at the top of the
amended return and file it at the same
address you used for your original
return.
For more information about the
charitable deduction, see section 642(c)
and related regulations.

Specific Instructions
Line 1—Amounts Paid or
Permanently Set Aside for
Charitable Purposes From Gross
Income
Enter amounts that were paid for a
charitable purpose out of the estate's or
trust's gross income, including any
capital gains that are attributable to
income under the governing instrument
or local law. Include amounts paid
during the tax year from gross income
received in a prior tax year, but only if no
deduction was allowed for any prior tax
year for these amounts.
Estates, and certain trusts, may claim
a deduction for amounts permanently
set aside for a charitable purpose from
gross income. Such amounts must be
permanently set aside during the tax
year to be used exclusively for religious,
charitable, scientific, literary, or
educational purposes, or for the
prevention of cruelty to children or
animals, or for the establishment,
acquisition, maintenance, or operation
of a public cemetery not operated for
profit.
For a trust to qualify, the trust may
not be a simple trust, and the set aside
amounts must be required by the terms
of a trust instrument that was created on
or before October 9, 1969.
-28-

Further, the trust instrument must
provide for an irrevocable remainder
interest to be transferred to or for the
use of an organization described in
section 170(c); or the trust must have
been created by a grantor who was at
all times after October 9, 1969, under a
mental disability to change the terms of
the trust.
Also, certain testamentary trusts that
were established by a will that was
executed on or before October 9, 1969,
may qualify. See Regulations section
1.642(c)-2(b).
Don't include any capital gains for the
tax year allocated to corpus and paid or
permanently set aside for charitable
purposes. Instead, enter these amounts
on line 4.

Line 2—Tax-Exempt Income
Allocable to Charitable
Contributions
Any estate or trust that pays or sets
aside any part of its income for a
charitable purpose must reduce the
deduction by the portion allocable to
any tax-exempt income. If the governing
instrument specifically provides as to
the source from which amounts are
paid, permanently set aside, or to be
used for charitable purposes, the
specific provisions control. In all other
cases, determine the amount of
tax-exempt income allocable to
charitable contributions by multiplying
line 1 by a fraction, the numerator of
which is the total tax-exempt income of
the estate or trust, and the denominator
of which is the gross income of the
estate or trust. Don't include in the
denominator any losses allocated to
corpus.

Line 4—Capital Gains for the Tax
Year Allocated to Corpus and Paid
or Permanently Set Aside for
Charitable Purposes
Enter the total of all capital gains for the
tax year that are:
• Allocated to corpus, and
• Paid or permanently set aside for
charitable purposes.

Line 6—Section 1202 Exclusion
Allocable to Capital Gains Paid or
Permanently Set Aside for
Charitable Purposes
If the exclusion of gain from the sale or
exchange of qualified small business
(QSB) stock was claimed, enter the part
Instructions for Form 1041 (2021)

of the gain included on Schedule A,
lines 1 and 4, that was excluded under
section 1202.

Schedule B—Income
Distribution Deduction
General Instructions

If the estate or trust was required to
distribute income currently or if it paid,
credited, or was required to distribute
any other amounts to beneficiaries
during the tax year, complete
Schedule B to determine the estate's or
trust's income distribution deduction.
Note. Use Schedule I (Form 1041) to
compute the DNI and income
distribution deduction on a minimum tax
basis.

Pooled income funds. Don't complete
Schedule B for these funds. Instead,
attach a separate statement to support
the computation of the income
distribution deduction. See Pooled
Income Funds, earlier, for more
information.
Separate share rule. If a single trust or
an estate has more than one
beneficiary, and if different beneficiaries
have substantially separate and
independent shares, their shares are
treated as separate trusts or estates for
the sole purpose of determining the DNI
allocable to the respective beneficiaries.
If the separate share rule applies,
figure the DNI allocable to each
beneficiary on a separate sheet and
attach the sheet to this return. Any
deduction or loss that is applicable
solely to one separate share of the trust
or estate isn't available to any other
share of the same trust or estate.
For more information, see section
663(c) and related regulations.
Withholding of tax on foreign persons. The fiduciary may be liable for
withholding tax on distributions to
beneficiaries who are foreign persons.
For more information, see Pub. 515,
Withholding of Tax on Nonresident
Aliens and Foreign Entities, and Forms
1042 and 1042-S.

Specific Instructions
Line 1—Adjusted Total Income
Generally, enter on line 1, Schedule B,
the amount from line 17 on page 1 of
Form 1041. However, if both line 4 and
line 17 on page 1 of Form 1041 are
losses, enter on line 1, Schedule B, the
smaller of those losses. If line 4 is zero

Instructions for Form 1041 (2021)

or a gain and line 17 is a loss, enter zero
on line 1, Schedule B.
If you are filing for a simple trust,
subtract from adjusted total income any
extraordinary dividends or taxable stock
dividends included on page 1, line 2,
and determined under the governing
instrument and applicable local law to
be allocable to corpus.

Line 2—Adjusted Tax-Exempt
Interest
To figure the adjusted tax-exempt
interest:
Step 1. Add tax-exempt interest
income on line 2 of Schedule A, any
expenses allowable under section 212
allocable to tax-exempt interest, and
any interest expense allocable to
tax-exempt interest.
Step 2. Subtract the Step 1 total from
the amount of tax-exempt interest
(including exempt-interest dividends)
received.
Section 212 expenses that are
directly allocable to tax-exempt interest
are allocated only to tax-exempt
interest. A reasonable proportion of
section 212 expenses that are indirectly
allocable to both tax-exempt interest
and other income must be allocated to
each class of income.
Figure the interest expense allocable
to tax-exempt interest according to the
guidelines in Rev. Proc. 72-18, 1972-1
C.B. 740.
See Regulations sections 1.643(a)-5
and 1.265-1 for more information.

Line 3
Include all capital gains, whether or not
distributed, that are attributable to
income under the governing instrument
or local law. For example, if the trustee
distributed 50% of the current year's
capital gains to the income beneficiaries
(and reflects this amount in column (1),
line 19 of Schedule D (Form 1041)), but
under the governing instrument all
capital gains are attributable to income,
then include 100% of the capital gains
on line 3. If the amount on Schedule D
(Form 1041), line 19, column (1), is a
net loss, enter zero.
If the exclusion of gain from the sale
or exchange of QSB stock was claimed,
don't reduce the gain on line 3 by any
amount excluded under section 1202.
-29-

Line 5
In figuring the amount of long-term and
short-term capital gain for the tax year
included on Schedule A, line 1, the
specific provisions of the governing
instrument control if the instrument
specifically provides as to the source
from which amounts are paid,
permanently set aside, or to be used for
charitable purposes.
In all other cases, determine the
amount to enter by multiplying line 1 of
Schedule A by a fraction, the numerator
of which is the amount of net capital
gains that are included in the accounting
income of the estate or trust (that is, not
allocated to corpus) and are distributed
to charities, and the denominator of
which is all items of income (including
the amount of such net capital gains)
included in the DNI.
Reduce the amount on line 5 by any
allocable section 1202 exclusion.

Line 8—Accounting Income
If you are filing for a decedent's estate
or a simple trust, skip this line. If you are
filing for a complex trust, enter the
income for the tax year determined
under the terms of the governing
instrument and applicable local law.
Don't include extraordinary dividends or
taxable stock dividends determined
under the governing instrument and
applicable local law to be allocable to
corpus.

Lines 9 and 10
Don't include any:
• Amount that was deducted on the
prior year's return that was required to
be distributed in the prior year;
• Amount that is paid or permanently
set aside for charitable purposes or
otherwise qualifying for the charitable
deduction; or
• Amount that is properly paid or
credited as a gift or bequest of a specific
amount of money or specific property.
Note. An amount that can be paid or
credited only from income isn't
considered a gift or bequest. Also, to
qualify as a gift or bequest, the amount
must be paid in three or fewer
installments.

Line 9—Income Required To Be
Distributed Currently
Line 9 is to be completed by all simple
trusts as well as complex trusts and
decedent's estates that are required to

distribute income currently, whether it is
distributed or not. The determination of
whether trust income is required to be
distributed currently depends on the
terms of the governing instrument and
the applicable local law.
The line 9 distributions are referred to
as first tier distributions and are
deductible by the estate or trust to the
extent of the DNI. The beneficiary
includes such amounts in his or her
income to the extent of his or her
proportionate share of the DNI.

Line 10—Other Amounts Paid,
Credited, or Otherwise Required
To Be Distributed
Line 10 is to be completed only by a
decedent's estate or complex trust.
These distributions consist of any other
amounts paid, credited, or required to
be distributed and are referred to as
second tier distributions. Such amounts
include annuities to the extent not paid
out of income, mandatory and
discretionary distributions of corpus,
and distributions of property in kind.
If Form 1041-T was timely filed to
elect to treat estimated tax payments as
made by a beneficiary, the payments
are treated as paid or credited to the
beneficiary on the last day of the tax
year and must be included on line 10.
Unless a section 643(e)(3) election is
made, the value of all noncash property
actually paid, credited, or required to be
distributed to any beneficiaries is the
smaller of:
1. The estate's or trust's adjusted
basis in the property immediately before
distribution, plus any gain or minus any
loss recognized by the estate or trust on
the distribution (basis of beneficiary), or
2. The FMV of such property.
If a section 643(e)(3) election is made
by the fiduciary, then the amount
entered on line 10 will be the FMV of the
property.
A fiduciary of a complex trust or a
decedent's estate may elect to treat any
amount paid or credited to a beneficiary
within 65 days following the close of the
tax year as being paid or credited on the
last day of that tax year. To make this
election, see the instructions for Other
Information, Question 6, later.
The beneficiary includes the amounts
on line 10 in his or her income only to
the extent of his or her proportionate
share of the DNI.

Complex trusts. If the second tier
distributions exceed the DNI allocable to
the second tier, the trust may have an
accumulation distribution. See the
line 11 instructions below.

Schedule G—Tax
Computation and
Payments

Line 11—Total Distributions

Line 1a

If line 11 is more than line 8, and you are
filing for a complex trust that has
previously accumulated income, see the
instructions for Schedule J, later, to see
if you must complete Schedule J (Form
1041).

Line 12—Adjustment for
Tax-Exempt Income
In figuring the income distribution
deduction, the estate or trust isn't
allowed a deduction for any item of the
DNI that isn't included in the gross
income of the estate or trust. Thus, for
purposes of figuring the allowable
income distribution deduction, the DNI
(line 7) is figured without regard to any
tax-exempt interest.
If tax-exempt interest is the only
tax-exempt income included in the total
distributions (line 11), and the DNI
(line 7) is less than or equal to line 11,
then enter on line 12 the amount from
line 2.
If tax-exempt interest is the only
tax-exempt income included in the total
distributions (line 11), and the DNI is
more than line 11 (that is, the estate or
trust made a distribution that is less than
the DNI), then figure the adjustment by
multiplying line 2 by a fraction, the
numerator of which is the total
distributions (line 11), and the
denominator of which is the DNI (line 7).
Enter the result on line 12.
If line 11 includes tax-exempt income
other than tax-exempt interest, figure
line 12 by subtracting the total of the
following from tax-exempt income
included on line 11:
1. The charitable contribution
deduction allocable to such tax-exempt
income, and
2. Expenses allocable to tax-exempt
income.
Expenses that are directly allocable
to tax-exempt income are allocated only
to tax-exempt income. A reasonable
proportion of expenses indirectly
allocable to both tax-exempt income
and other income must be allocated to
each class of income.
-30-

Part I – Tax Computation
2021 tax rate schedule. For tax years
beginning in 2021, figure the tax using
the following Tax Rate Schedule and
enter the tax on line 1a. However, see
the Instructions for Schedule D (Form
1041) and the Qualified Dividends Tax
Worksheet, later.
2021 Tax Rate Schedule
If taxable
income
is:
Over—
$0
2,650
9,550
13,050

But not
over—
$2,650
9,550
13,050
-----

Of the
Its tax is: amount
over—
10%
$0
$265 + 24%
2,650
$1,921 + 35%
9,550
$3,146 + 37%
13,050

Schedule D (Form 1041) and Schedule D Tax Worksheet. Use Part V of
Schedule D (Form 1041) or the
Schedule D Tax Worksheet, whichever
is applicable, to figure the estate's or
trust's tax if the estate or trust files
Schedule D (Form 1041) and has:
• A net capital gain and any taxable
income, or
• Qualified dividends on line 2b(2) of
Form 1041 and any taxable income.
Qualified Dividends Tax Worksheet.
If you don't have to complete Part I or
Part II of Schedule D and the estate or
trust has an amount entered on
line 2b(2) of Form 1041 and any taxable
income (line 23), then figure the estate's
or trust's tax using the worksheet, later,
and enter the tax on line 1a.
Note. You must reduce the amount you
enter on line 2b(2) of Form 1041 by the
portion of the section 691(c) deduction
claimed on line 19 of Form 1041 if the
estate or trust received qualified
dividends that were IRD.
Line 1c—AMT. Attach Schedule I
(Form 1041) if any of the following
apply.
• The estate or trust must complete
Schedule B.
• The estate or trust claims a credit on
line 2b, 2c, or 2d of Schedule G.
• The estate's or trust's share of
alternative minimum taxable income
(line 27 of Schedule I (Form 1041))
exceeds $25,700.
Instructions for Form 1041 (2021)

Qualified Dividends Tax Worksheet—Schedule G, Part I, line 1a

Keep for Your Records

Caution: Don’t use this worksheet if the estate or trust must complete Schedule D (Form 1041).
1.

Enter the amount from Form 1041, line 23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

Enter the amount from Form 1041, line 2b(2) . . . . . . . .

3.
4.

If you are claiming investment interest expense on Form
4952, enter the amount from line 4g; otherwise
enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
Subtract line 3 from line 2. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . .

4.

5.

Subtract line 4 from line 1. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . .

5.

6.

Enter the smaller of the amount on line 1 or $2,700

6.

7.

Enter the smaller of the amount on line 5 or line 6 . . . . . . . . . . . . . . . . . . . . . .

1.

2.

....................

8.

7.
Subtract line 7 from line 6. If zero or less, enter -0-. This amount is taxed at 0% . . . . . . . . . . . . . . . .

9.

Enter the smaller of line 1 or line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.

8.

9.
Subtract line 8 from line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.
Enter the smaller of line 1 or $13,250 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.
Add lines 5 and 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.
Subtract line 12 from line 11. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . 13.
Enter the smaller of line 10 or line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.
Multiply line 14 by 15% (.15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.
Enter the amount from line 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.
Add lines 8 and 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.
Subtract line 17 from line 16. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . 18.
Multiply line 18 by 20% (.20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.
Figure the tax on the amount on line 5. Use the 2021 Tax Rate Schedule . . . . . . . . . . . . . . . . . . . . . 20.
Add lines 15, 19 and 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.
Figure the tax on the amount on line 1. Use the 2021 Tax Rate Schedule . . . . . . . . . . . . . . . . . . . . . 22.
Tax on all taxable income. Enter the smaller of line 21 or line 22 here and on Sch.
G, line 1a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.

Enter the amount from line 54 of
Schedule I (Form 1041) on line 1c.
Line 1d—Total. If the amount from
line 14 of Form 8978 is a positive
amount, include it in the total reported
on line 1d.

Line 2a—Foreign Tax Credit

Attach Form 1116, Foreign Tax Credit
(Individual, Estate, or Trust), if you elect
to claim credit for income or profits
taxes paid or accrued to a foreign
country or a U.S. possession. The
estate or trust may claim credit for that
part of the foreign taxes not allocable to
the beneficiaries (including charitable
beneficiaries). Enter the estate's or
trust's share of the credit on line 2a. See
Pub. 514, Foreign Tax Credit for
Individuals, for details.

Instructions for Form 1041 (2021)

Line 2b—General Business
Credit
Don't include any amounts that
are allocated to a beneficiary.
CAUTION Credits that are allocated
between the estate or trust and the
beneficiaries are listed in the
instructions for Schedule K-1, box 13,
later. Generally, these credits are
apportioned on the basis of the income
allocable to the estate or trust and the
beneficiaries.

!

Enter on line 2b the estate's or trust's
total general business credit allowed for
the current year from Form 3800. The
estate or trust must file Form 3800 to
claim any of the general business
credits. Generally, if the estate's or
trust's only source of a credit is from a
pass-through entity and the beneficiary
isn't entitled to an allocable share of a
credit, you aren't required to complete
the source form for that credit. However,
-31-

certain credits have limitations and
special computations that may require
you to complete the source form. See
the Instructions for Form 3800 for more
information.

Line 2c—Credit for Prior Year
Minimum Tax

An estate or trust that paid AMT in a
previous year may be eligible for a
minimum tax credit in 2021. See Form
8801, Credit for Prior Year Minimum
Tax—Individuals, Estates, and Trusts.

Line 2d—Bond Credits

Complete and attach Form 8912, Credit
to Holders of Tax Credit Bonds, if the
estate or trust claims a credit for holding
a tax credit bond. Also, be sure to
include the credit in interest income.

Line 2e—Total Credits

To claim a credit allowable to the estate
or trust other than the credits entered on
lines 2a through 2d, include the

ESBT Tax Worksheet—Schedule G, Part I, line 4

Keep for Your Records

Electing Small Business Trust Tax Computation
1.
2a.
2b.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.

Ordinary income (loss) from Schedule K-1 (Form 1120-S) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.
Total ordinary dividends from Schedule K-1 (Form 1120-S) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2a.
Qualified Dividends from Schedule K-1 (Form 1120-S) . . . . . . . . . . . . . . . . . . 2b.
Capital gain. See instructions and attach Schedule D (Form 1041) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
Other Income (loss) reported on Schedule K-1 (Form 1120-S) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
Total income. Add lines 1, 2a, 3, and 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.
Other allowable deductions from Schedule K-1 (Form 1120-S) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.
Administrative expenses (allocated to the S portion) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
State and local income taxes (allocated to the S portion) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.
Interest expense on indebtedness to acquire S corporation stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.
Charitable contribution deduction. Check here if deduction includes prior year carryover [ ] . . . . . . 10.
Qualified business income deduction (S portion). Attach Form 8995 or 8995-A . . . . . . . . . . . . . . . . . 11.
Total deductions. Add lines 6 through 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.

14a.

Taxable income (S portion). Subtract line 12 from 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.
Tax. Tax on taxable income. See instructions. . . . . . . . . . . . . . . . . . . . . . . . . . 14a.

14b.

Alternative minimum tax (S portion). Attach Schedule I (Form 1041) . . . . . . . 14b.

14c.

Total. Add lines 14a and 14b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14c.
.

15a.

Foreign tax credit (S portion). Attach Form 1116 . . . . . . . . . . . . . . . . . . . . . . . . 15a.
General business credit (S portion). Attach Form 3800 . . . . . . . . . . . . . . . . . . 15b.

15b.
15c.
15d.

Credit for prior-year minimum tax (S portion). Attach Form 8801 . . . . . . . . . . . 15c.
Bond credits (S portion). Attach Form 8912 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15d.

15e.

Total credits. Add lines 15a through 15d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15e.
.

16.
17.

Recapture taxes (S portion). Check if from: Form 4255 [ ] or Form 8611 [ ]

. . . . . . . . . . . . . . . . . . 16.
Total ESBT tax. Subtract line 15e from line 14c and add line 16. Enter here and on Form 1041,
Schedule G, Part I, line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.

allowable credit in the total for line 2e.
Complete and attach the appropriate
form and write the form number and
amount of the allowable credit on the
dotted line to the left of the entry space.
If the amount from line 14 of Form
8978 is a negative amount, treat it as a
positive amount and add it to the total
reported on line 2e.

Line 4—Tax on the ESBT
Portion of the Trust

Use the ESBT Tax Worksheet above to
figure the ESBT tax. Enter the amount
from line 17 of the ESBT Worksheet on
line 4.
See Electing Small Business Trusts
(ESBTs), earlier, for the special tax
computation rules that apply to the
portion of an ESBT consisting of stock
in one or more S corporations.

Line 5—Net Investment Income
Tax
Enter the amount of net investment
income tax calculated and attach Form
8960. See the Instructions for Form
8960 to calculate the tax and Net
Investment Income Tax, later, for more
information.

Line 6—Recapture Taxes
Recapture of investment credit. If
the estate or trust disposed of
investment credit property or changed
its use before the end of the recapture
period, see Form 4255, Recapture of
Investment Credit, to figure the
recapture tax allocable to the estate or
trust. Include the tax on line 6 and write
“ICR” on the dotted line to the left of the
entry space.
Recapture of low-income housing
credit. If the estate or trust disposed of
property (or there was a reduction in the
qualified basis of the property) on which
-32-

the low-income housing credit was
claimed, see Form 8611, Recapture of
Low-Income Housing Credit, to figure
any recapture tax allocable to the estate
or trust. Include the tax on line 6 and
write “LIHCR” on the dotted line to the
left of the entry space.
Recapture of qualified electric vehicle credit. If the estate or trust claimed
the qualified electric vehicle credit in a
prior tax year for a vehicle that ceased
to qualify for the credit, part or all of the
credit may have to be recaptured. See
Regulations section 1.30-1(b) for
details. If the estate or trust owes any
recapture tax, include it on line 6 and
write “QEVCR” on the dotted line to the
left of the entry space.
Recapture of the Indian employment
credit. Generally, if the estate or trust
terminates a qualified employee less
than 1 year after the date of initial
employment, any Indian employment
credit allowed for a prior tax year by
Instructions for Form 1041 (2021)

reason of wages paid or incurred to that
employee must be recaptured. See
Form 8845 and section 45A for details.
If the estate or trust owes any recapture
tax, include it on line 6 and write “IECR”
on the dotted line to the left of the entry
space.
Recapture of the new markets credit.
If the estate or trust owes any new
markets recapture tax, include it on
line 6 and write “NMCR” on the dotted
line to the left of the entry space. For
more information, including how to
figure the recapture amount, see section
45D(g).
Recapture of the credit for employer-provided child care facilities. If
the facility ceased to operate as a
qualified child care facility or there was
a change in ownership, part or all of the
credit may have to be recaptured. See
Form 8882 for details. If the estate or
trust owes any recapture tax, include it
on line 6 and write “ECCFR” on the
dotted line to the left of the entry space.
Recapture of the alternative motor
vehicle credit. See section 30B(h)(8)
for details. Include the tax on line 6 and
write “AMVCR” on the dotted line to the
left of the entry space.
Recapture of the alternative fuel vehicle refueling property credit. See
section 30C(e)(5) for details. Include the
tax on line 6 and write “ARPCR” on the
dotted line to the left of the entry space.

Line 7 — Household
Employment Taxes

If any of the following apply, get
Schedule H (Form 1040), Household
Employment Taxes, and its instructions,
to see if the estate or trust owes these
taxes.
1. The estate or trust paid any one
household employee cash wages of
$2,300 or more in 2021. Cash wages
include wages paid by checks, money
orders, etc. When figuring the amount of
cash wages paid, combine cash wages
paid by the estate or trust with cash
wages paid to the household employee
in the same calendar year by the
household of the decedent or
beneficiary for whom the administrator,
executor, or trustee of the estate or trust
is acting.
2. The estate or trust withheld
federal income tax during 2021 at the
request of any household employee.
3. The estate or trust paid total cash
wages of $1,000 or more in any
calendar quarter of 2020 or 2021 to
household employees.

Instructions for Form 1041 (2021)

Enter on line 7 any household
employment taxes owed from
Schedule H (Form 1040), Part I, line 8d,
or Part III, line 26.

interest due under the look-back
method of section 167(g)(2). To the left
of the entry space, write “From Form
8866” and the amount of interest due.

Note. See Amended Schedule H (Form
1040 ) under F. Initial Return, Amended
Return, etc., earlier, for information on
filing an amended Schedule H (Form
1040) for a Form 1041.

Interest on deferral of gain from certain constructive ownership transactions. Include the interest due under
section 1260(b) on any deferral of gain
from certain constructive ownership
transactions. To the left of the entry
space, write “1260(b)” and the amount
of interest due.

Line 8 — Other Taxes and
Amounts Due
Triggering event under section
965(i). If you had a triggering event
under section 965(i) during the year,
enter on Line 8, Other taxes and
amounts due, the current year tax
liability from the triggered deferred net
965 tax liability from Form 965-A, Part
IV, column (f).
ESBTs. If a triggering event occurred
in the S portion of the ESBT, also
include on the attachment that shows
the amount of the net 965 tax liability
attributable to the S portion of the trust
the triggered deferred net 965 tax
liability from Form 965-A, Part IV,
column (f).
Interest on deferred tax attributable
to installment sales of certain timeshares and residential lots and certain nondealer real property installment obligations. If an obligation
arising from the disposition of real
property to which section 453(l) or 453A
applies is outstanding at the close of the
year, the estate or trust must include the
interest due under section 453(l)(3)(B)
or 453A(c), whichever is applicable, in
the amount to be entered on line 8 of
Schedule G, Form 1041, with the
notation “Section 453(l) interest” or
“Section 453A(c) interest,” whichever is
applicable. Attach a schedule showing
the computation.
Form 4970, Tax on Accumulation
Distribution of Trusts. Include on this
line any tax due on an accumulation
distribution from a trust. To the left of the
entry space, write “From Form 4970”
and the amount of the tax.
Form 8697, Interest Computation
Under the Look-Back Method for
Completed Long-Term Contracts.
Include the interest due under the
look-back method of section 460(b)(2).
To the left of the entry space, write
“From Form 8697” and the amount of
interest due.
Form 8866, Interest Computation
Under the Look-Back Method for
Property Depreciated Under the Income Forecast Method. Include the
-33-

Form 5329, Additional Taxes on
Qualified Plans (Including IRAs) and
Other Tax-Favored Accounts. If the
estate or trust fails to receive the
minimum distribution under section
4974, use Form 5329 to pay the excise
tax. To the left of the entry space, write
“From Form 5329” and the amount of
the tax.
Additional tax on the early disposition of noncash property for which a
section 247(g)(3) election was made
by an Alaska Native Settlement
Trust. This additional 10% tax only
should be shown on an amended return
filed by a Settlement Trust for the year in
which the Settlement Trust received a
contribution of noncash property from
an Alaska Native Corporation and
elected to defer the recognition of
income related to such property, but
disposed of the property within the first
tax year subsequent to the tax year the
Settlement Trust received the property.
Determine the increase in tax due to the
inclusion of the deferred income and
include on this line the additional tax
due, equal to 10% of the increase in tax
due to the inclusion of the deferred
income. The increase in tax due to the
inclusion of the deferred income, which
is the base amount for the computation
of the additional 10% tax shown on this
line, should be shown elsewhere on
Schedule G. If the amended return also
shows changes to income, deductions,
or credits unrelated to the inclusion of
the deferred income, attach a schedule
showing the computation of the
additional tax due only to the inclusion
of the deferred income. To the left of the
entry space, write “Section 247(g)(3)
tax.”

Line 9—Total Tax

Add Schedule G, Part I, lines 3 through
8. Enter the total on Schedule G, Part I,
line 9; and page 1 of Form 1041, line 24.

Part II – Payments
Line 10—2021 Estimated Tax
Payments and Amount Applied
From 2020 Return

Enter the amount of any estimated tax
payment you made with Form 1041-ES
for 2021 plus the amount of any
overpayment from the 2020 return that
was applied to the 2021 estimated tax.

If the estate or trust is the beneficiary
of another trust and received a payment
of estimated tax that was credited to the
trust (as reflected on the Schedule K-1
issued to the trust), then report this
amount separately with the notation
“section 643(g)” in the space next to
line 10 and include this amount in the
amount entered on line 10.
Don't include on Form 1041
estimated tax paid by an
CAUTION individual before death. Instead,
include those payments on the
decedent's final income tax return.

!

Line 11—Estimated Tax
Payments Allocated to
Beneficiaries (from Form
1041-T)

The trustee (or executor, for the final
year of the estate) may elect under
section 643(g) to have any portion of its
estimated tax treated as a payment of
estimated tax made by a beneficiary or
beneficiaries. The election is made on
Form 1041-T, Allocation of Estimated
Tax Payments to Beneficiaries, which
must be filed by the 65th day after the
close of the trust's tax year. Form
1041-T shows the amounts to be
allocated to each beneficiary. This
amount is reported on the beneficiary's
Schedule K-1 (Form 1041), box 13,
code A.
Attach Form 1041-T to your return
only if you haven't yet filed it; however,
attaching Form 1041-T to Form 1041
doesn't extend the due date for filing
Form 1041-T. If you have already filed
Form 1041-T, don't attach a copy to
your return.
Failure to file Form 1041-T by
the due date (March 7, 2022, for
CAUTION calendar year estates and
trusts) will result in an invalid election.
An invalid election will require the filing
of amended Schedules K-1 for each
beneficiary who was allocated a
payment of estimated tax.

!

Line 13—Tax Paid with Form
7004

If you filed Form 7004 to request an
extension of time to file Form 1041,
enter the amount that you paid with the
extension request.

Line 14—Federal Income Tax
Withheld

Use line 14 to claim a credit for any
federal income tax withheld (and not
repaid) by (a) an employer on wages
and salaries of a decedent received by
the decedent's estate; (b) a payer of
certain gambling winnings (for example,
state lottery winnings); or (c) a payer of
distributions from pensions, annuities,
retirement or profit-sharing plans, IRAs,
insurance contracts, etc., received by a
decedent's estate or trust. Attach a copy
of Form W-2, Form W-2G, or Form
1099-R to the front of the return.
Except for backup withholding
(as explained below), withheld
CAUTION income tax can't be passed
through to beneficiaries on either
Schedule K-1 or Form 1041-T.

!

Backup withholding. If the estate or
trust received a 2021 Form 1099
showing federal income tax withheld
(that is, backup withholding) on interest
income, dividends, or other income,
check the box and include the amount
withheld on income retained by the
estate or trust in the total for line 14.
Report on Schedule K-1 (Form
1041), box 13, code B, any credit for
backup withholding on income
distributed to the beneficiary.

Line 15—Current Net 965 Tax
Liability - Eligible for
Installment Payment Election

If you have a section 965(i) net tax
liability for which a triggering event has
occurred in the current year and you are
making a section 965(h) election with
respect to that section 965 net tax
liability, enter this amount from Form
965-A, Part I, column (f).

Line 16a—Credit for Tax Paid
on Undistributed Capital Gains

Attach Copy B of Form 2439, Notice to
Shareholder of Undistributed
Long-Term Capital Gains.

Line 16b—Credit for Federal
Tax on Fuels

Enter any credit for federal excise taxes
paid on fuels that are ultimately used for
nontaxable purposes (for example, an
off-highway business use). Attach Form
4136, Credit for Federal Tax Paid on
-34-

Fuels. See Pub. 510, Excise Taxes, for
more information.

Line 17— Credit for Qualified
Sick and Family Leave Wages
for Leave Taken Before April 1,
2021

Enter the refundable portion of the
qualified sick and family leave credit
from Schedule H (Form 1040), Part I,
line 8e on line 17.

Line 18—Credit for Qualified
Sick and Family Leave Wages
for Leave Taken After March 31,
2021

Enter the refundable portion of the
qualified sick and family leave credit
from Schedule H (Form 1040), Part I,
line 8f on line 18.

Net Investment Income
Tax

Certain estates and trusts may be
subject to the Net Investment Income
Tax (NIIT). Estates and trusts use Form
8960 to report their Net Investment
Income (NII) and calculate the tax. The
amount of NIIT payable by the estate or
trust is reported on Form 1041,
Schedule G, line 5.

The NIIT is imposed on estates and
trusts to the extent that they have
undistributed net investment income
and adjusted gross income (AGI)
exceeding $13,050. See Definitions,
earler, for the calculation of an estate or
trust’s AGI. The following types of
estates and trusts may owe the NIIT in
addition to their regular income tax
liability:
• Decedent’s estates,
• Simple and complex trusts,
• Electing small business trusts
(ESBTs),
• Pooled income funds, and
• Bankruptcy estates.
However, in the case of bankruptcy
estates, the adjusted gross income
threshold is $125,000.

Calculation of Net Investment Income. In general, an estate or trust’s
NII is calculated in the same way as an
individual. However, there are special
rules for the calculation of NII in the
case of an ESBT. See instructions to
Form 8960 and Regulations section
1.1411-3(e) for information on the
calculation (and Regulations section
1.1411-3(c)(1) for information on the
ESBT calculation).
Distributions on Net Investment Income. The NIIT is imposed on estates
Instructions for Form 1041 (2021)

and trusts to the extent it has
undistributed net investment income. In
order to arrive at the estate or trust’s
undistributed net investment income,
the estate or trust’s NII is reduced for (1)
distributions of NII to beneficiaries, and
(2) NII allocable to charities when the
estate or trust is allowed a deduction
under section 642(c). Instructions for
Form 8960, line 18, provide more
information on the calculation of
undistributed net investment income.
NII allocable to the deduction under
section 642(c). An estate, trust, or
pooled income fund’s NII is reduced by
the amount of NII allocable to the
charitable deduction allowed under
section 642(c). In the case of an estate,
trust, or pooled income fund that has NII
and non-NII income in a year when a
section 642(c) deduction is claimed, the
amount of the NII deduction allocable to
the section 642(c) deduction will be less
than the amount reported on Form
1041, Schedule A, line 7 (or on the
separate calculation in the case of a
pooled income fund).
Beneficiary reporting. In general, the
amount of the income distribution
deduction (from Form 1041,
Schedule B, line 15) that reduces the
estate or trust’s NII will be the amount of
NII that will be taxable to the
beneficiaries on their Schedules K-1
(Form 1041).
The Schedule K-1 has a code H in
box 14 to report the amount of net
investment income distributed to the
beneficiary. The amount reported in
code H represents an adjustment (either
positive or negative) that the beneficiary
must use in completing its Form 8960 (if
necessary). In the case where the trust’s
income distribution deduction allowed in
calculating undistributed net investment
income is less than the amount on
Schedule B, line 15, then code H will
show a negative number that is the
difference between the two amounts. In
the case of an estate or trust that issues
more than one Schedule K-1 for a year,
the sum of the amounts reported in
code H on all of the Schedules K-1 will
be the difference between Schedule B,
line 15, and the amount deducted on
Form 8960, line 18b, for amounts of NII
distributed to a beneficiary.
The beneficiary's NII will equal

TIP all taxable amounts reported on

the Schedule K-1, adjusted by
the amount reported in box 14, code H.

The only instance where code H

TIP will be a positive number is

• The estate or trust owns directly, or

indirectly, an (a) interest in a section
1291 fund, or (b) interest in a controlled
foreign corporation or qualified electing
fund and no election under Regulations
section 1.1411–10(g) has been made
with respect to that interest, and
• The distribution from one of the
entities described above is (a) net
investment income to the estate or trust,
but not included in its taxable income,
and (b) the distributions from the estate
or trust to the beneficiary(ies) in the year
exceed the amount of the income
distribution deduction allowed for
regular tax purposes (from Schedule B,
line 15).
Special rules. In the final year of an
estate or trust, deductions in excess of
income may be reported to the
beneficiary on Schedule K-1, box 11.
These deductions may also be
deductible by the beneficiary for NIIT
purposes. In this situation, the
terminating estate or trust should
provide the beneficiary information
regarding whether the amounts reported
in box 11, codes A through E, include
any amounts that are deductible for NIIT
purposes. See Regulations section
1.1411-4(g)(4).

Other Information
Question 1

If the estate or trust received tax-exempt
income, figure the allocation of
expenses between tax-exempt and
taxable income on a separate sheet and
attach it to the return. Enter only the
deductible amounts on the return. Don't
figure the allocation on the return itself.
For more information, see the
instructions for Allocation of Deductions
for Tax-Exempt Income, earlier.
Report the amount of tax-exempt
interest income received or accrued in
the space provided below Question 1.
Also, include any exempt-interest
dividends the estate or trust received as
a shareholder in a mutual fund or other
regulated investment company.
Paycheck Protection Program (PPP)
loan forgiveness reporting. Report
tax-exempt income resulting from the
forgiveness of a PPP loan on this line.
Attach a statement to the trust’s or
estate’s return for each tax year in which
the trust or estate is applying Rev. Proc.
2021-48, sections 3.01(1), (2), or (3).
The statement should include the

when:

Instructions for Form 1041 (2021)

-35-

following information, for each PPP
loan:
a) The trust’s or estate’s name,
address, and EIN;
b) A statement that the trust or
estate is applying section 3.01(1),
(2), or (3) of Rev. Proc. 2021-48, as
applicable;
c) The amount of tax-exempt
income from forgiveness of the PPP
loan that the trust or estate is
treating as received or accrued
during the tax year; and
d) Whether forgiveness of the PPP
loan has been granted as of the
date the return is filed.
A trust or estate that did not report
tax-exempt income from a PPP loan on
its 2020 return may file an amended
return to apply Rev. Proc. 2021-48 and
should do so according to these
instructions. A trust or estate that
reported tax-exempt income from a PPP
loan on its 2020 return, the timing of
which corresponds to one of the options
presented in Rev. Proc. 2021-48, need
not file an amended return solely to
attach the statement that is described in
these instructions.
As explained in section 3.03 of Rev.
Proc. 2021-48, if a trust or estate treats
tax-exempt income resulting from a PPP
loan as received or accrued prior to
when forgiveness of the PPP loan is
granted and the amount of forgiveness
granted is less than the amount of
tax-exempt income that was previously
treated as received or accrued, the trust
or estate must make appropriate
adjustments (if any) on an amended
return for the tax year in which the trust
or estate treated the tax-exempt income
as received or accrued. The trust or
estate should attach a statement to
such amended return that includes the
following information:
a) The trust’s or estate’s name,
address, and EIN;
b) A statement that the trust or
estate is making adjustments in
accordance with section 3.03 of
Rev. Proc. 2021-48; and
c) The tax year in which tax-exempt
income was originally reported, the
amount of tax-exempt income that
was originally reported in such tax
year, and the amount of tax-exempt
income being adjusted on the
amended return.

Question 2

All salaries, wages, and other
compensation for personal services
must be included on the return of the
person who earned the income, even if

the income was irrevocably assigned to
a trust by a contract assignment or
similar arrangement.
The grantor or person creating the
trust is considered the owner if he or
she keeps “beneficial enjoyment” of or
substantial control over the trust
property. The trust's income,
deductions, and credits are allocable to
the owner.
If you checked “Yes” for Question 2,
see Special Reporting Instructions,
earlier.

Question 3

Check the “Yes” box and enter the
name of the foreign country if either 1 or
2 below applies.
1. The estate or trust owns more
than 50% of the stock in any corporation
that owns one or more foreign bank
accounts.
2. At any time during the year the
estate or trust had an interest in or
signature or other authority over a bank,
securities, or other financial account in a
foreign country.
Exception. Check “No” if either of the
following applies to the estate or trust:
• The combined value of the accounts
was $10,000 or less during the whole
year, or
• The accounts were with a U.S.
military banking facility operated by a
U.S. financial institution.
If you checked “Yes” for Question 3,
electronically file FinCEN Form 114,
Report of Foreign Bank and Financial
Accounts (FBAR), with the Department
of the Treasury using the FinCEN's BSA
E-Filing Sytem. Because FinCEN Form
114 isn't a tax form, don't file it with
Form 1041.
See fincen.gov for more information.
If you are required to file
FinCEN Form 114 but don't, you
CAUTION may have to pay a penalty of up
to $10,000 (or more in some cases).

!

Question 4

The estate or trust may be required to
file Form 3520, Annual Return To
Report Transactions With Foreign
Trusts and Receipt of Certain Foreign
Gifts, if:
• It directly or indirectly transferred
property or money to a foreign trust. For
this purpose, any U.S. person who
created a foreign trust is considered a
transferor;
• It is treated as the owner of any part
of the assets of a foreign trust under the
grantor trust rules; or

• It received a distribution from a
foreign trust.
An owner of a foreign trust must

TIP ensure that the trust files an

annual information return on
Form 3520-A, Annual Information
Return of Foreign Trust With a U.S.
Owner.

Question 5

An estate or trust claiming an interest
deduction for qualified residence
interest (as defined in section 163(h)(3))
on seller-provided financing must
include on an attachment to the 2021
Form 1041 the name, address, and TIN
of the person to whom the interest was
paid or accrued (that is, the seller).
If the estate or trust received or
accrued such interest, it must provide
identical information on the person
liable for such interest (that is, the
buyer). This information doesn't need to
be reported if it duplicates information
already reported on Form 1098.

Question 6

To make the section 663(b) election to
treat any amount paid or credited to a
beneficiary within 65 days following the
close of the tax year as being paid or
credited on the last day of that tax year,
check the box. This election can be
made by the fiduciary of a complex trust
or the executor of a decedent's estate.
For the election to be valid, you must file
Form 1041 by the due date (including
extensions). Once made, the election is
irrevocable.

Question 7

To make the section 643(e)(3) election
to recognize gain on property distributed
in kind, check the box and see the
Instructions for Schedule D (Form
1041).

Question 9

Generally, a beneficiary is a skip person
if the beneficiary is in a generation that
is two or more generations below the
generation of the transferor to the trust.
To determine if a beneficiary that is a
trust is a skip person, and for exceptions
to the general rules, see the definition of
a skip person in the instructions for
Schedule R of Form 706.

Question 10

A domestic trust that is a specified
domestic entity must file Form 8938
along with Form 1041 for the tax year.
Form 8938 must be filed each year the
value of the trust's specified foreign
financial assets meets or exceeds the
reporting threshold. A trust exceeds the
-36-

threshold amount if the total value of the
specified foreign financial assets is
more than $50,000 on the last day of the
tax year or more than $75,000 at any
time during the tax year. For more
information on domestic trusts that are
specified domestic entities, the filing
threshold, and the types of foreign
financial assets that must be reported,
see the Instructions for Form 8938.
A domestic trust that is required to
file Form 8938 along with Form 1041 for
the tax year must check “Yes” to
Question 10 under Other Information,
Form 1041.

Question 11a

A distribution of S corporation stock by
an estate or trust that results in a
change of ownership for federal income
tax purposes is a triggering event
described in Regulations section
1.965-7(c)(3). If the estate or trust
transfers less than all of its shares of
stock of the S corporation, the transfer
will be a triggering event only with
respect to the portion of the estate’s or
trust’s section 965(i) net tax liability that
is properly allocable to the transferred
shares. If the person who received the
distribution of S corporation stock is an
eligible section 965(i) transferee, the
estate or trust may enter into a transfer
agreement with the eligible section
965(i) transferee to prevent the
assessment of the estate’s or trust’s
section 965(i) net tax liability in the tax
year that includes the triggering event.
The estate or trust must report in Part
IV, column (g) of Form 965-A, Individual
Report of Net 965 Tax Liability, the
transfer out of the section 965 tax
liability properly allocable to S
corporation shares for which the estate
or trust entered into a transfer
agreement with an eligible section
965(i) transferee. See the instructions
for Form 965-A for additional
information.
The transfer agreement must be
filed within 30 days of the
CAUTION triggering event. See Form
965-D, Transfer Agreement Under
965(i)(2), and the related instructions for
additional information.

!

Question 11b

If the estate or trust distributed S
corporation shares and the estate or
trust did not enter into a timely transfer
agreement for all shares transferred
during the tax year, the transfer of
shares not covered by a transfer
agreement is a triggering event. See
Instructions for Form 1041 (2021)

Triggering event under section 965(i),
earlier.
The estate or trust may file a consent
agreement under section 965(i)(4)(D) to
make the election under section 965(h)
to pay in installments the triggered
section 965(i) net tax liability. See Form
965-E, Consent Agreement Under
Section 965(i)(4)(D), and the related
instructions for how to file the consent
agreement. See the instructions for
Triggered deferred S
corporation-related net 965 tax liability,
in Part I of the instructions for Form
965-A for how to make the installment
election.

!

CAUTION

The due date of the original
Form 965-E is within 30 days of
the triggering event.

The due date of the election to
pay in installments is the due
CAUTION date of the return for the tax
year, including extension. The actual
payment of the first installment is due no
later than the due date of the return for
the tax year without extension, even if
the election is made on a return filed by
the extended due date.

!

Question 12
Note. Check the “Yes” box if the estate
or trust entered into a transfer
agreement as an eligible 965(i)
transferee.
If during the tax year the estate or
trust entered into a transfer agreement
as an eligible 965(i) transferee, the
estate or trust must report the transfer in
of that liability on Part IV of Form 965-A.
See the instructions for Form 965-A for
additional information.

Question 13

If the deemed owner of a grantor portion
of the ESBT is a nonresident alien, the
items of income, deduction, and credit
from that grantor portion must be
reallocated to the S portion. See
Schedule G, Part I, line 4, Tax on the
ESBT Portion of the Trust, earlier for
how to figure the tax on the S portion of
the trust.

Question 14

The S portion of the ESBT must take
into account the qualified items of
income, gain, deduction, and loss and
other items from any S corporation
owned by the ESBT, and any qualified
items of income, gain, deduction, and
loss and other items reallocated to the S
portion. See Question 13, earlier. For
purposes of determining whether the
taxable income of an ESBT exceeds the
Instructions for Form 1041 (2021)

threshold amount, the S portion and the
non-S portion of an ESBT are treated as
a single trust. See Regulations section
1.199A-6(d)(3)(vi).

Schedule J (Form 1041) —
Accumulation Distribution
for Certain Complex
Trusts
General Instructions

Use Schedule J (Form 1041) to report
an accumulation distribution for a
domestic complex trust that was:
• Previously treated at any time as a
foreign trust (unless an exception is
provided in future regulations), or
• Created before March 1, 1984,
unless that trust would not be
aggregated with other trusts under the
rules of section 643(f) if that section
applied to the trust.
An accumulation distribution is the
excess of amounts properly paid,
credited, or required to be distributed
(other than income required to be
distributed currently) over the DNI of the
trust reduced by income required to be
distributed currently. To have an
accumulation distribution, the
distribution must exceed the accounting
income of the trust.

Specific Instructions
Part I—Accumulation Distribution
in 2021
Line 1—Distribution Under Section
661(a)(2)
Enter the amount from Form 1041,
Schedule B, line 10, for 2021. This is the
amount properly paid, credited, or
required to be distributed other than the
amount of income for the current tax
year required to be distributed currently.

Line 2—DNI
Enter the amount from Form 1041,
Schedule B, line 7, for 2021. This is the
amount of DNI for the current tax year
determined under section 643(a).

Line 3—Distribution Under Section
661(a)(1)
Enter the amount from Form 1041,
Schedule B, line 9, for 2021. This is the
amount of income for the current tax
year required to be distributed currently.

-37-

Line 5—Accumulation Distribution
If line 11 of Form 1041, Schedule B, is
more than line 8 of Form 1041,
Schedule B, complete the rest of
Schedule J and file it with Form 1041,
unless the trust has no previously
accumulated income.
Generally, amounts accumulated
before a beneficiary reaches age 21
may be excluded by the beneficiary.
See sections 665 and 667(c) for
exceptions relating to multiple trusts.
The trustee reports to the IRS the total
amount of the accumulation distribution
before any reduction for income
accumulated before the beneficiary
reaches age 21. If the multiple trust
rules don't apply, the beneficiary claims
the exclusion when filing Form 4970, as
you may not be aware that the
beneficiary may be a beneficiary of
other trusts with other trustees.
For examples of accumulation
distributions that include payments from
one trust to another trust, and amounts
distributed for a dependent's support,
see Regulations section 1.665(b)-1A(b).

Part II—Ordinary Income
Accumulation Distribution

Enter the applicable year at the top of
each column for each throwback year.

Line 6—DNI for Earlier Years
Enter the applicable amounts as
follows:
Throwback
year(s)
1969–1977
1978–1979
1980 . . .
1981–1982
1983–1996
1997–2020

Amount from line
. .
. .
. . .
. .
. .
. .

Form 1041, Schedule C, line 5
Form 1041, line 61
Form 1041, line 60
Form 1041, line 58
Form 1041, Schedule B, line 9
Form 1041, Schedule B, line 7

For information about throwback
years, see the instructions for line 13.
For purposes of line 6, in figuring the
DNI of the trust for a throwback year,
subtract any estate tax deduction for
IRD if the income is includible in figuring
the DNI of the trust for that year.

Line 7—Distributions Made During
Earlier Years
Enter the applicable amounts as
follows:

Throwback
year(s)
1969–1977
1978 . . .
1979 . . .
1980 . . .
1981–1982
1983–1996
1997–2020

Amount from line
. .
. . .
. . .
. . .
. .
. .
. .

Form 1041, Schedule C, line 8
Form 1041, line 64
Form 1041, line 65
Form 1041, line 64
Form 1041, line 62
Form 1041, Schedule B, line 13
Form 1041, Schedule B, line 11

Line 11—Prior Accumulation
Distribution Thrown Back to Any
Throwback Year
Enter the amount of prior accumulation
distributions thrown back to the
throwback years. Don't enter
distributions excluded under section
663(a)(1) for gifts, bequests, etc.

Line 13—Throwback Years
Allocate the amount on line 5 that is an
accumulation distribution to the earliest
applicable year first, but don't allocate
more than the amount on line 12 for any
throwback year. An accumulation
distribution is thrown back first to the
earliest preceding tax year in which
there is undistributed net income (UNI).
Then, it is thrown back beginning with
the next earliest year to any remaining
preceding tax years of the trust. The
portion of the accumulation distribution
allocated to the earliest preceding tax
year is the amount of the UNI for that
year. The portion of the accumulation
distribution allocated to any remaining
preceding tax year is the amount by
which the accumulation distribution is
larger than the total of the UNI for all
earlier preceding tax years.
A tax year of a trust during which the
trust was a simple trust for the entire
year isn't a preceding tax year unless (a)
during that year the trust received
outside income, or (b) the trustee didn't
distribute all of the trust's income that
was required to be distributed currently
for that year. In this case, UNI for that
year must not be more than the greater
of the outside income or income not
distributed during that year.
The term “outside income” means
amounts that are included in the DNI of
the trust for that year but that aren't
“income” of the trust as defined in
Regulations section 1.643(b)-1. Some
examples of outside income are (a)
income taxable to the trust under
section 691; (b) unrealized accounts
receivable that were assigned to the
trust; and (c) distributions from another

trust that include the DNI or UNI of the
other trust.

Line 16—Tax-Exempt Interest
Included on Line 13
For each throwback year, divide line 15
by line 6 and multiply the result by the
following:
Throwback
year(s)
1969–1977
1978–1979
1980 . . .
1981–1982
1983–2020

Amount from line
. .
. .
. . .
. .
. .

Form 1041, Schedule C,
line 2(a)
Form 1041, line 58(a)
Form 1041, line 57(a)
Form 1041, line 55(a)
Form 1041, Schedule B, line 2

Part III—Taxes Imposed on
Undistributed Net Income

For the regular tax computation, if there
is a capital gain, complete lines 18
through 25 for each throwback year. If
the trustee elected the alternative tax on
capital gains, complete lines 26 through
31 instead of lines 18 through 25 for
each applicable year. If there is no
capital gain for any year, or there is a
capital loss for every year, enter on
line 9 the amount of the tax for each
year identified in the instruction for
line 18 and don't complete Part III. If the
trust received an accumulation
distribution from another trust, see
Regulations section 1.665(b)-1A.
Note. The alternative tax on capital
gains was repealed for tax years
beginning after December 31, 1978.
The maximum rate on net capital gain
for 1981, 1987, and 1991 through 2020
isn't an alternative tax for this purpose.

Line 18—Regular Tax
Enter the applicable amounts as
follows:
Throwback
year(s)
1969–1976
1977 . . .
1978–1979
1980–1984
1985–1986
1987 . . .
1988–2020

Amount from line
. .
. . .
. .
. .
. .
. . .
. .

Form 1041, page 1, line 24
Form 1041, page 1, line 26
Form 1041, line 27
Form 1041, line 26c
Form 1041, line 25c
Form 1041, line 22c
Form 1041, Schedule G,
line 1a

or a zero on either or both of the two
lines indicated, enter zero on line 19.
Throwback year(s)
1969–1970

. . . . .

1971–1978

. . . . .

1979

. . . . . . . . .

1980–1981

1982

. . . . .

. . . . . . . . .

1983–1996

. . . . .

1997–2002

. . . . .

2003

. . . . . . . . .

2004–2012

. . . . .

2013–2020

. .

Amount from line
Schedule D, line 10,
column 2, or
Schedule D, line 12,
column 2
Schedule D, line 14,
column 2, or
Schedule D, line 16,
column 2
Schedule D, line 18,
column (b), or
Schedule D, line 20,
column (b)
Schedule D, line 14,
column (b), or
Schedule D, line 16,
column (b)
Schedule D, line 16,
column (b), or
Schedule D, line 18,
column (b)
Schedule D, line 15,
column (b), or
Schedule D, line 17,
column (b)
Schedule D, line 14,
column (2), or
Schedule D, line 16,
column (2)
Schedule D, line 14a,
column (2), or
Schedule D, line 16a,
column (2)
Schedule D, line 13,
column (2), or
Schedule D, line 15,
column (2)
Schedule D, line 17,
column (2), or
Schedule D, line 19,
column (2)

Line 20—Trust's Share of Net
Long-Term Gain
Enter the applicable amounts as
follows:
Throwback year(s)

Amount from line

1969–1970

. . . .

50% of Schedule D,
line 13(e)

1971–1977

. . . .

50% of Schedule D,
line 17(e)

1978

. . . . . . . .

1979

. . . . . . . .

Schedule D, line 17(e), or
line
31, whichever is
applicable,
less Form 1041, line 23
Schedule D, line 25 or
line 27,
whichever is applicable,
less
Form 1041, line 23
Schedule D, line 21, less

1980–1981

. . . .

Line 19—Trust's Share of Net
Short-Term Gain
For each throwback year, enter the
smaller of the capital gain from the two
lines indicated. If there is a capital loss
-38-

Instructions for Form 1041 (2021)

Throwback year(s)
1982

. . . . . . . .

1983–1986

. . . .

1987–1996

. . . .

1997–2001

Amount from line
Schedule D, line 22
Schedule D, line 23, less
Schedule D, line 24
Schedule D, line 22, less
Schedule D, line 23
Schedule D, the smaller
of any gain on line 16
or line 17, column (b)

. . . .

Schedule D, the smaller
of any gain on line 15c or
line 16, column (2)

2002

. . . . . . . .

Schedule D, the smaller
of any gain on line 15a or
line 16, column (2)

2003

. . . . . . . .

Schedule D, the smaller
of any gain on line 15a or
line 16a, column (2)
Schedule D, the smaller
of any gain on line 14a
or line 15, column (2)
Schedule D, the smaller of
any gain on line 18a or
line 19, column (2)

2004–2012
2013–2020

. . . .

. . .

Line 23—Taxable Income
Enter the applicable amounts as
follows:
Throwback
year(s)
1969–1976
1977 . . .
1978–1979
1980–1984
1985–1986
1987 . . .
1988–1996
1997 . . .
1998–2018
2019–2020

Amount from line
. . .
. . . .
. . .
. . .
. . .
. . . .
. . .
. . . .
. . .
. . .

Form 1041, page 1, line 23
Form 1041, page 1, line 25
Form 1041, line 26
Form 1041, line 25
Form 1041, line 24
Form 1041, line 21
Form 1041, line 22
Form 1041, line 23
Form 1041, line 22
Form 1041, line 23

Line 26—Tax on Income Other
Than Long-Term Capital Gain
Enter the applicable amounts as
follows:
Throwback
year(s)
1969 . . .
1970 . . .
1971 . . .
1972–1975
1976–1978

Amount from line
. . . . .
. . . . .
. . . . .
. . . .
. . . .

Schedule D, line 20
Schedule D, line 19
Schedule D, line 50
Schedule D, line 48
Schedule D, line 27

Line 27—Trust's Share of Net
Short-Term Gain
If there is a loss on any of the following
lines, enter zero on line 27 for the
applicable throwback year. Otherwise,
enter the applicable amounts as follows:

Instructions for Form 1041 (2021)

Throwback
year(s)
1969–1970
1971–1978

Amount from line
.
.

Schedule D, line 10, column 2
Schedule D, line 14, column 2

Line 28—Trust's Share of Taxable
Income Less Section 1202
Deduction
Enter the applicable amounts as
follows:
Throwback year(s)

Amount from line

1969 . . .
1970 . . .
1971 . . .
1972–1975
1976–1978

Schedule D, line 19
Schedule D, line 18
Schedule D, line 38
Schedule D, line 39
Schedule D, line 21

. . . . . .
. . . . . .
. . . . . .
. . . . .
. . . . .

Part IV—Allocation to
Beneficiary

Complete Part IV for each beneficiary. If
the accumulation distribution is
allocated to more than one beneficiary,
attach an additional copy of Schedule J
with Part IV completed for each
additional beneficiary. Give each
beneficiary a copy of his or her
respective Part IV information. If more
than 5 throwback years are involved,
use another Schedule J, completing
Parts II and III for each additional
throwback year.
If the beneficiary is a nonresident
alien individual or a foreign corporation,
see section 667(e) about retaining the
character of the amounts distributed to
determine the amount of the U.S.
withholding tax.
The beneficiary uses Form 4970 to
figure the tax on the distribution. The
beneficiary also uses Form 4970 for the
section 667(b)(6) tax adjustment if an
accumulation distribution is subject to
estate or generation-skipping transfer
tax. This is because the trustee can't be
the estate or generation-skipping
transfer tax return filer.

Schedule K-1 (Form
1041)— Beneficiary's
Share of Income,
Deductions, Credits, etc.
General Instructions

Use Schedule K-1 (Form 1041) to report
the beneficiary's share of income,
deductions, and credits from a trust or a
decedent's estate.

-39-

Grantor type trusts don't use
Schedule K-1 (Form 1041) to
CAUTION report the income, deductions,
or credits of the grantor (or other person
treated as owner). See Grantor Type
Trusts, earlier.

!

Who Must File
The fiduciary (or one of the joint
fiduciaries) must file Schedule K-1. A
copy of each beneficiary's Schedule K-1
is attached to the Form 1041 filed with
the IRS, and each beneficiary is given a
copy of his or her respective
Schedule K-1. One copy of each
Schedule K-1 must be retained for the
fiduciary's records.

Beneficiary's Identifying Number
As a payer of income, you are required
to request and provide a proper
identifying number for each recipient of
income. Enter the beneficiary's number
on the respective Schedule K-1 when
you file Form 1041. Individuals and
business recipients are responsible for
giving you their TINs upon request. You
may use Form W-9 to request the
beneficiary's identifying number.
Penalty. You may be charged a $50
penalty for each failure to provide a
required TIN, unless reasonable cause
is established for not providing it.
Explain any reasonable cause in a
signed affidavit and attach it to this
return.
Truncating recipient's identification
number on beneficiary's statement.
The estate or trust can truncate a
beneficiary’s identifying number on the
Schedule K-1 the estate or trust sends
to the beneficiary. Truncation isn't
allowed on the Schedule K-1 the estate
or trust files with the IRS. Also, the
estate or trust can't truncate its own
identification number on any form.
To truncate, where allowed, replace
the first five digits of the nine-digit
number with asterisks (*) or Xs (for
example, an SSN xxx-xx-xxxx would
appear as ***-**-xxxx or XXX-XX-xxxx).
For more information, see Regulations
section 301.6109-4.

Substitute Forms
You don't need IRS approval to use a
substitute Schedule K-1 if it is an exact
copy of the IRS schedule. The boxes
must use the same numbers and titles
and must be in the same order and
format as on the comparable IRS
Schedule K-1. The substitute schedule
must include the OMB number and the

six-digit form ID code in the upper
right-hand corner of the schedule.
You must provide each beneficiary
with the Instructions for Beneficiary
Filing Form 1040 or other prepared
specific instructions for each item
reported on the beneficiary's
Schedule K-1.

Inclusion of Amounts in
Beneficiaries' Income
Simple trust. The beneficiary of a
simple trust must include in his or her
gross income the amount of the income
required to be distributed currently,
whether or not distributed, or if the
income required to be distributed
currently to all beneficiaries exceeds the
DNI, his or her proportionate share of
the DNI. The determination of whether
trust income is required to be distributed
currently depends on the terms of the
trust instrument and applicable local
law. See Regulations section 1.652(c)-4
for a comprehensive example.
Estates and complex trusts. The
beneficiary of a decedent's estate or
complex trust must include in his or her
gross income the sum of:
1. The amount of the income
required to be distributed currently, or if
the income required to be distributed
currently to all beneficiaries exceeds the
DNI (figured without taking into account
the charitable deduction), his or her
proportionate share of the DNI (as so
figured), and
2. All other amounts properly paid,
credited, or required to be distributed, or
if the sum of the income required to be
distributed currently and other amounts
properly paid, credited, or required to be
distributed to all beneficiaries exceeds
the DNI, his or her proportionate share
of the excess of DNI over the income
required to be distributed currently.
See Regulations section 1.662(c)-4
for a comprehensive example.
For complex trusts that have more
than one beneficiary, and if different
beneficiaries have substantially
separate and independent shares, their
shares are treated as separate trusts for
the sole purpose of determining the
amount of DNI allocable to the
respective beneficiaries. A similar rule
applies to treat substantially separate
and independent shares of different
beneficiaries of an estate as separate
estates. For examples of the application
of the separate share rule, see the
regulations under section 663(c).

Gifts and bequests. Don't include in
the beneficiary's income any gifts or
bequests of a specific sum of money or
of specific property under the terms of
the governing instrument that are paid
or credited in three installments or less.
Amounts that can be paid or credited
only from income of the estate or trust
don't qualify as a gift or bequest of a
specific sum of money.
Past years. Don't include in the
beneficiary's income any amounts
deducted on Form 1041 for an earlier
year that were credited or required to be
distributed in that earlier year.
Character of income. The
beneficiary's income is considered to
have the same proportion of each class
of items entering into the computation of
DNI that the total of each class has to
the DNI (for example, half dividends and
half interest if the income of the estate
or trust is half dividends and half
interest).
Allocation of deductions.
Generally, items of deduction that enter
into the computation of DNI are
allocated among the items of income to
the extent such allocation isn't
inconsistent with the rules set out in
section 469 and its regulations, relating
to passive activity loss limitations, in the
following order.
First, all deductions directly
attributable to a specific class of income
are deducted from that income. For
example, rental expenses, to the extent
allowable, are deducted from rental
income.
Second, deductions that aren't
directly attributable to a specific class of
income generally may be allocated to
any class of income, as long as a
reasonable portion is allocated to any
tax-exempt income. Deductions
considered not directly attributable to a
specific class of income under this rule
include fiduciary fees, and state income
and personal property taxes. The
charitable deduction, however, must be
ratably apportioned among each class
of income included in DNI.
Finally, any excess deductions that
are directly attributable to a class of
income may be allocated to another
class of income. However, in no case
can excess deductions from a passive
activity be allocated to income from a
nonpassive activity, or to portfolio
income earned by the estate or trust.
Excess deductions attributable to
tax-exempt income can't offset any
other class of income.
-40-

In no case can deductions be
allocated to an item of income that isn't
included in the computation of DNI, or
attributable to corpus.
You can't show any negative
amounts for any class of income shown
in boxes 1 through 8 of Schedule K-1.
However, for the final year of the estate
or trust, certain deductions or losses
can be passed through to the
beneficiary(ies). See the instructions for
box 11 for more information on these
deductions and losses. Also, the
beneficiary's share of depreciation and
depletion is apportioned separately.
These deductions may be allocated to
the beneficiary(ies) in amounts greater
than his or her income. See
Depreciation, Depletion, and
Amortization, earlier, and Rev. Rul.
74-530, 1974-2 C.B. 188.

Beneficiary's Tax Year
The beneficiary's income from the
estate or trust must be included in the
beneficiary's tax year during which the
tax year of the estate or trust ends. See
Pub. 559 for more information, including
the effect of the death of a beneficiary
during the tax year of the estate or trust.

General Reporting Information

If the return is for a fiscal year or a short
tax year, fill in the tax year space at the
top of each Schedule K-1. On each
Schedule K-1, enter the information
about the estate or trust and the
beneficiary in Parts I and II (items A
through H). In Part III, enter the
beneficiary's share of each item of
income, deduction, credit, and any other
information the beneficiary needs to file
his or her income tax return.
Codes. In box 9 and boxes 11 through
14, identify each item by entering a
code in the column to the left of the
entry space for the dollar amount.
These codes are identified in these
instructions and on the back of the
Schedule K-1.
Attached statements. Enter an
asterisk (*) after the code, if any, in the
column to the left of the dollar amount
entry space for each item for which you
have attached a statement providing
additional information. For those
informational items that can't be
reported as a single dollar amount,
enter the code and asterisk in the
left-hand column and enter “STMT” in
the entry space to the right to indicate
that the information is provided on an
attached statement. More than one
attached statement can be placed on
the same sheet of paper and should be
Instructions for Form 1041 (2021)

identified in alphanumeric order by box
number followed by the letter code (if
any). For example: “Box 9, Code
A—Depreciation” (followed by the
information the beneficiary needs).
Too few entry spaces on Schedule K-1? If the estate or trust has more
coded items than the number of spaces
in box 9 or boxes 11 through 14, don't
enter a code or dollar amount in the last
entry space of the box. In the last entry
space, enter an asterisk in the left
column and enter “STMT” in the entry
space to the right. Report the additional
items on an attached statement and
provide the box number, code,
description, and dollar amount or
information for each additional item. For
example: “Box 13, Code H—Biofuel
Producer Credit, $500.00.”

Specific Instructions
Part I. Information About the
Estate or Trust

On each Schedule K-1, enter the name,
address, and identifying number of the
estate or trust. Also, enter the name and
address of the fiduciary.

Item D
If the fiduciary of a trust or decedent's
estate filed Form 1041-T, you must
check this box and enter the date it was
filed.

Item E
If this is the final year of the estate or
trust, you must check this box.
Note. If this is the final K-1 for the
beneficiary, check the “Final K-1” box at
the top of Schedule K-1.

Part II. Information About the
Beneficiary

Complete a Schedule K-1 for each
beneficiary. On each Schedule K-1,
enter the beneficiary's name, address,
and identifying number.

Item H
Check the foreign beneficiary box if the
beneficiary is a nonresident alien
individual, a foreign corporation, or a
foreign estate or trust. Otherwise, check
the domestic beneficiary box.

Instructions for Form 1041 (2021)

Part III. Beneficiary's Share of
Current Year Income,
Deductions, Credits, and Other
Items
Box 1—Interest
Enter the beneficiary's share of the
taxable interest income minus allocable
deductions.

Box 2a—Total Ordinary Dividends
Enter the beneficiary's share of ordinary
dividends minus allocable deductions.

Box 2b—Total Qualified Dividends
Enter the beneficiary's share of qualified
dividends minus allocable deductions.

Box 3—Net Short-Term Capital
Gain
Enter the beneficiary's share of the net
short-term capital gain from Schedule D
(Form 1041), line 17, column (1), minus
allocable deductions. Don't enter a loss
in box 3. If, for the final year of the
estate or trust, there is a capital loss
carryover, enter in box 11, code C, the
beneficiary's share of short-term capital
loss carryover. However, if the
beneficiary is a corporation, enter in
box 11, code C, the beneficiary's share
of all short- and long-term capital loss
carryovers as a single item. See section
642(h) and related regulations for more
information.

Boxes 4a through 4c—Net
Long-Term Capital Gain
Enter the beneficiary's share of the net
long-term capital gain from Schedule D
(Form 1041), lines 18a through 18c,
column (1), minus allocable deductions.
Don't enter a loss in boxes 4a
through 4c. If, for the final year of the
estate or trust, there is a capital loss
carryover, enter in box 11, code D, the
beneficiary's share of the long-term
capital loss carryover. (If the beneficiary
is a corporation, see the instructions for
box 3.) See section 642(h) and related
regulations for more information.
Gains or losses from the complete or
partial disposition of a rental, rental real
estate, or trade or business activity that
is a passive activity must be shown on
an attachment to Schedule K-1.

-41-

Box 5—Other Portfolio and
Nonbusiness Income
Enter the beneficiary's share of
annuities, royalties, or any other
income, minus allocable deductions
(other than directly apportionable
deductions), that isn't subject to any
passive activity loss limitation rules at
the beneficiary level. Use boxes 6
through 8 to report income items subject
to the passive activity rules at the
beneficiary's level.

Boxes 6 through 8—Ordinary
Business Income, Rental Real
Estate, and Other Rental Income
Enter the beneficiary's share of trade or
business, rental real estate, and other
rental income, minus allocable
deductions (other than directly
apportionable deductions). To assist the
beneficiary in figuring any applicable
passive activity loss limitations, also
attach a separate schedule showing the
beneficiary's share of income derived
from each trade or business, rental real
estate, and other rental activity.

Box 9—Directly Apportioned
Deductions
The limitations on passive
activity losses and credits under
CAUTION section 469 apply to estates
and trusts. Estates and trusts that
distribute income to beneficiaries are
allowed to apportion depreciation,
depletion, and amortization deductions
to the beneficiaries. These deductions
are referred to as “directly apportionable
deductions.”

!

Rules for treating a beneficiary's income
and directly apportionable deductions
from an estate or trust and other rules
for applying the passive loss and credit
limitations to beneficiaries of estates
and trusts haven't yet been issued.
Any directly apportionable deduction,
such as depreciation, is treated by the
beneficiary as having been incurred in
the same activity as incurred by the
estate or trust. However, the character
of such deduction may be determined
as if the beneficiary incurred the
deduction directly.
To assist the beneficiary in figuring any
applicable passive activity loss
limitations, also attach a separate
schedule showing the beneficiary's
share of directly apportionable
deductions derived from each trade or
business, rental real estate, and other
rental activity.

Enter the beneficiary's share of directly
apportioned deductions using codes A
through C.
Depreciation (code A). Enter the
beneficiary's share of the depreciation
deductions directly apportioned to each
activity reported in boxes 5 through 8.
See the instructions under Deductions,
earlier, for a discussion of how the
depreciation deduction is apportioned
between the beneficiaries and the
estate or trust. Report any AMT
adjustment or tax preference item
attributable to depreciation separately in
box 12, using code G.
Note. An estate or trust can't make an
election under section 179 to expense
certain depreciable business assets.
Depletion (code B). Enter the
beneficiary's share of the depletion
deduction under section 611 directly
apportioned to each activity reported in
boxes 5 through 8. See Depreciation,
Depletion, and Amortization, earlier, for
a discussion of how the depletion
deduction is apportioned between the
beneficiaries and the estate or trust.
Report any tax preference item
attributable to depletion separately in
box 12, using code H.
Amortization (code C). Itemize the
beneficiary's share of the amortization
deductions directly apportioned to each
activity reported in boxes 5 through 8.
Apportion the amortization deductions
between the estate or trust and the
beneficiaries in the same way that the
depreciation and depletion deductions
are divided. Report any AMT
adjustment attributable to amortization
separately in box 12, using code I.

Box 10—Estate Tax Deduction
(Including Certain
Generation-Skipping Transfer
Taxes)
If the distribution deduction consists of
any IRD, and the estate or trust was
allowed a deduction under section
691(c) for the estate tax paid
attributable to such income (see the
line 19 instructions), then the beneficiary
is allowed an estate tax deduction in
proportion to his or her share of the
distribution that consists of such
income. For an example of the
computation, see Regulations section
1.691(c)-2. Figure the computation on a
separate sheet and attach it to the
return.

Box 11, Code A—Excess
Deductions on Termination Section 67(e) Expenses
If this is the final return of the estate or
trust, and there are excess deductions
on termination (see the instructions for
line 23), enter the beneficiary's share of
excess deductions for section 67(e)
expenses (amounts allowed in arriving
at adjusted gross income) in box 11,
using code A. See Final RegulationsTD9918, for examples of allowable
excess deductions on termination of an
estate or trust.
Note. The beneficiary may deduct the
excess deductions shown in box 11,
code A, as an adjustment to income on
Schedule 1 (Form 1040), Part II,
line 24k.
Excess deductions on termination
occur only during the last tax year of the
trust or decedent's estate when the total
deductions (excluding the charitable
deduction and exemption) are greater
than the gross income during that tax
year.
Generally, a deduction based on an
NOL carryover isn't available to a
beneficiary as an excess deduction.
However, if the last tax year of the
estate or trust is also the last year in
which an NOL carryover may be taken
(see section 172(b)), the NOL carryover
is considered an excess deduction on
the termination of the estate or trust to
the extent it isn't absorbed by the estate
or trust during its final tax year. For more
information, see Regulations section
1.642(h)-4 for a discussion of the
allocation of the carryover among the
beneficiaries.
Only the beneficiary of an estate or
trust that succeeds to its property is
allowed to deduct that entity's excess
deductions on termination. A beneficiary
who doesn't have enough income in that
year to absorb the entire deduction can't
carry the balance over to any
succeeding year.

Box 11, Code B—Excess
Deductions on Termination Non-Miscellaneous Itemized
Deductions
If this is the final return of the estate or
trust, and there are excess deductions
on termination (see the instructions for
line 23), enter the beneficiary's share of
excess deductions for nonmiscellaneous itemized deductions in
box 11, using code B. Figure the
-42-

deductions on a separate sheet and
attach it to the return.
An individual beneficiary must be
able to itemize deductions in order to
claim excess deductions that are
non-miscellaneous itemized deductions
in determining taxable income.
Note. Section 67(g) suspends
miscellaneous itemized deductions
subject to the 2% floor for tax years
2018 through 2025. Therefore,
miscellaneous itemized deductions are
not deductible as excess deductions on
termination of an estate or trust. Consult
your state taxing authority for
information about deducting
miscellaneous itemized deductions on
your state tax return.

Box 11, Codes C and D—Unused
Capital Loss Carryover
Upon termination of the trust or
decedent's estate, the beneficiary
succeeding to the property is allowed as
a deduction any unused capital loss
carryover under section 1212. If the
estate or trust incurs capital losses in
the final year, use the Capital Loss
Carryover Worksheet in the Instructions
for Schedule D (Form 1041) to figure the
amount of capital loss carryover to be
allocated to the beneficiary.

Box 11, Codes E and F—NOL
Carryover
Upon termination of a trust or
decedent's estate, a beneficiary
succeeding to its property is allowed to
deduct any unused NOL (and any
ATNOL) carryover for regular and AMT
purposes if the carryover would be
allowable to the estate or trust in a later
tax year but for the termination. Enter in
box 11, using codes E and F, the
unused carryover amounts.

Box 12—AMT Items
Adjustment for minimum tax purposes (code A). Enter the beneficiary's
share of the adjustment for minimum tax
purposes.
To figure the adjustment, subtract the
beneficiary's share of the income
distribution deduction figured on
Schedule B, line 15, from the
beneficiary's share of the income
distribution deduction on a minimum tax
basis figured on Schedule I (Form
1041), line 42. The difference is the
beneficiary's share of the adjustment for
minimum tax purposes.
Instructions for Form 1041 (2021)

Note. Schedule B, line 15 equals the
sum of all Schedules K-1, boxes 1, 2a,
3, 4a, 5, 6, 7, and 8.
AMT adjustment attributable to
qualified dividends, net short-term
capital gains, or net long-term capital gains (codes B through D). If any
part of the amount reported in box 12,
code A, is attributable to qualified
dividends (code B), net short-term
capital gain (code C), or net long-term
capital gain (code D), enter that part
using the applicable code.
AMT adjustment attributable to unrecaptured section 1250 gain or 28%
rate gain (codes E and F). Enter the
beneficiary's distributive share of any
AMT adjustments to the unrecaptured
section 1250 gain (code E) or 28% rate
gain (code F), whichever is applicable,
in box 12.
Accelerated depreciation, depletion,
and amortization (codes G through
I). Enter any adjustments or tax
preference items attributable to
depreciation, depletion, or amortization
that were directly apportioned to the
beneficiary. For property placed in
service before 1987, report separately
the accelerated depreciation of real and
leased personal property.
Exclusion items (code J). Enter the
beneficiary's share of the adjustment for
minimum tax purposes from
Schedule K-1, box 12, code A, that is
attributable to exclusion items
(Schedule I (Form 1041), lines 2, 3, 4, 5,
and 7).

Box 13—Credits and Credit
Recapture
Enter each beneficiary's share of the
credits and credit recapture using the
applicable codes. Listed below are the
credits that can be allocated to the
beneficiary(ies). Attach a statement if
additional information must be provided
to the beneficiary as explained below.

• Credit for estimated taxes (code A).
Payment of estimated tax to be credited
to the beneficiary (section 643(g)).
See the instructions for
Schedule G, Part II, line 11
CAUTION before you make an entry to
allocate any estimated tax payments to
a beneficiary. If the fiduciary doesn't
make a valid election, then the IRS will
disallow the estimated tax payment that
is reported on Schedule K-1 and
claimed on the beneficiary's return.

!

• Credit for backup withholding (code
B).
Instructions for Form 1041 (2021)

!

CAUTION

Income tax withheld on wages
can't be distributed to the
beneficiary.

• The low-income housing credit (code
C). Attach a statement that shows the
beneficiary's share of the amount, if any,
entered on line 6 of Form 8586,
Low-Income Housing Credit, with
instructions to report that amount on
Form 8586, line 4 or Form 3800, Part III,
line 4d, if the beneficiary's only source
for the credit is a pass-through entity.
• Rehabilitation credit and energy
credit (code D). Attach a statement that
shows the beneficiary's apportioned
share of basis, expenditures, and other
information that is necessary for the
beneficiary to complete Form 3468,
Investment Credit, for the rehabilitation
credit and the energy credit. See the
Instructions for Form 3468 for more
information.
• Other qualifying investment credit
(code E). Attach a statement that shows
the beneficiary's apportioned share of
qualified investment and other
information that is necessary for the
beneficiary to complete Form 3468 for
the qualifying advanced coal project
credit, qualifying gasification project
credit, and qualifying advanced energy
project credit. See the Instructions for
Form 3468 for more information.
• Work opportunity credit (code F).
• Credit for small employer health
insurance premiums (code G).
• Biofuel producer credit (code H).
• Credit for increasing research
activities (code I).
• Renewable electricity, refined coal,
and Indian coal production credit (code
J). Attach a statement that shows
separately the amount of the credit the
beneficiary must report on line 19 of
Form 8835, including the allocation of
the Part II credit for production during
the 4-year period beginning on the date
the facility was placed in service and for
production after that period.
• Empowerment zone employment
credit (code K).
• Indian employment credit (code L).
• Orphan drug credit (code M).
• Credit for employer provided child
care and facilities (code N).
• Biodiesel and renewable diesel fuels
credit (code O). If the credit includes the
small agri-biodiesel credit, attach a
statement that shows the beneficiary's
share of the small agri-biodiesel credit,
the number of gallons claimed for the
small agri-biodiesel credit, and the
estate's or trust's productive capacity for
agri-biodiesel.
• Credit to holders of tax credit bonds
(code P).
-43-

• Credit for employer differential wage
payments (code Q).
• Recapture of credits (code R). On an
attached statement to Schedule K-1,
provide any information the beneficiary
will need to report recapture of credits.
• Other credits (code Z). Use code Z to
report the beneficiary's share of the
employee retention credit. See Form
5884-A and its instructions for more
information about the employee
retention credit.
Box 14—Other Information
Enter the dollar amounts and applicable
codes for the items listed under Other
Information.
Foreign taxes (code B). Enter the
beneficiary's allocable share of taxes
paid or accrued to a foreign country.
Attach a statement reporting the
beneficiary's share of foreign tax (paid
or accrued) and income by category
including interest, dividends, rents and
royalties, and other income. See Form
1116 and Pub. 514 for more
information.
Foreign trading gross receipts
(code G). Enter the beneficiary's
share, if any, of foreign trading gross
receipts. See Form 8873, Extraterritorial
Income Exclusion, for more information.
Net investment income tax (code H).
Use code H to identify the amount of the
beneficiary's adjustment for section
1411 net investment income or
deductions. See the Instructions for
Form 8960. An attachment may be
provided with the K-1 informing the
beneficiary of the detailed items to be
reported on Form 1040 or 1040-SR.
See Net Investment Income Tax, earlier,
for more information on these amounts.
Section 199A information (code I).
In the case of a trust or estate, the
qualified business income (QBI)
deduction, also known as the section
199A deduction, is determined at the
beneficiary level for the portions of QBI,
qualified REIT dividends, and qualified
publicly traded partnership items
apportioned to the beneficiaries. To
allow beneficiaries to correctly figure
their QBI deduction, the trust or estate
must enter an asterisk (*) on each
beneficiary’s Schedule K-1 next to code
I and enter “STMT” in the right column to
indicate that the information is provided
on an attached statement. Do not add
amounts into a single number and
report it on Schedule K-1. The
information must be separately
identified for each trade or business the
trust or estate directly conducts,

including specified service trades or
businesses (SSTBs). The trust or estate
must attach the statement to each
Schedule K-1, separately identifying the
beneficiary’s allocable share of:
1. Qualified items of income, gain,
deduction, and loss;
2. W-2 wages;
3. Unadjusted basis immediately
after acquisition (UBIA) of qualified
property;
4. Qualified PTP items; and
5. Section 199A dividends, also
known as qualified real estate
investment trust (REIT) dividends.
The trust or estate must make an initial
determination of which items are
qualified items of income, gain,
deduction, and loss at its level and
report to each beneficiary their share of
all items that may be qualified items at
the beneficiary level. See the heading
Determining the Trust or Estate’s QBI or
Qualified PTP Income, later. The
beneficiary must then determine
whether each item is includible in QBI.
In addition, the trust or estate must also
report on whether any of its trades or
businesses are SSTBs and identify on
the statement any trades or businesses
that are aggregated.
Trusts and estates should use
Statement A—QBI Pass-through Entity
Reporting, in these instructions, or a
substantially similar statement, to report
each beneficiary’s allocable information
from each trade or business, including
QBI items, W-2 wages, UBIA of
qualified property, qualified PTP items,
and section 199A dividends by
attaching the completed statement(s) to
each beneficiary’s Schedule K-1. The
trust or estate should also use
Statement A—QBI Pass-through Entity
Reporting to report each beneficiary’s
share of QBI items, W-2 wages, UBIA of
qualified property, qualified PTP items,
and section 199A dividends reported to
the trust or estate by another entity.
Note. The estate or trust must report
each beneficiary's share of qualified
items of income, gain, deduction and
loss from a PTP. The PTP component is
not limited by the W-2 wages and UBIA
of qualified property limitations.
Therefore, neither the PTP nor its
owners (including estates and trusts) is
required to report W-2 wages or UBIA of
qualified property amounts related to a
trade or business operated by a PTP.

Trusts and estates should use
Statement B—QBI Pass-through Entity
Aggregation Election(s), in these
instructions, or a substantially similar
statement, to report aggregated trades
or businesses and provide supporting
information to beneficiaries on each
Schedule K-1.
Trusts and estates should use
Statement C—QBI Pass-through Entity
Reporting- Patrons of Specified
Agricultural and Horticultural
Cooperatives, in these instructions, or a
substantially similar statement, to report
allocable QBI and W-2 wages allocable
to qualified payments from a specified
agricultural or horticultural cooperative
for each trade or business. This
statement should also be used to report
each beneficiary’s allocable section
199A(g) deduction reported to the trust
or estate by the specified cooperative.
Determining the trust or estate’s
qualified trades or businesses. The
trust or estate’s qualified trades or
businesses include its section 162
trades or businesses, except for
specified service trades or businesses,
or the trade or business of providing
services as an employee. A section 162
trade or business generally includes any
activity carried on to make a profit and
with considerable, regular, and
continuous activity. For more
information on what qualifies as a trade
or business for purposes of section
199A, see the Instructions for Form
8995, Qualified Business Income
Deduction Simplified Computation, or
Form 8995-A, Qualified Business
Income Deduction.
Rental real estate. Rental real
estate may constitute a trade or
business for purposes of the QBI
deduction if the rental real estate:
• Rises to the level of a trade or
business under section 162,
• Satisfies the requirements for the
rental real estate safe harbor in Rev.
Proc. 2019-38, 2019-42 I.R.B. 942, or
• Meets the self-rental exception (that
is, the rental or licensing of property to a
commonly controlled trade or business
conducted by an individual or relevant
pass-through entity (RPE)) in
Regulations section 1.199A-1(b)(14).
The determination of whether rental real
estate constitutes a trade or business
for purposes of the QBI deduction is
made by the trust or estate. The trust or
estate must first make this
determination and then only include the
allocable share of rental real estate
-44-

items of income, gain, loss, and
deduction on the statement provided to
beneficiaries. Rental real estate that
does not meet one of the three
conditions noted above does not
constitute a trade or business for
purposes of the QBI deduction and
must not be included in the QBI
information provided to beneficiaries.
Specified service trades or
businesses excluded from qualified
trades or businesses. SSTBs are
generally excluded from the definition of
a qualified trade or business. An SSTB
is any trade or business providing
services in the fields of health, law,
accounting, actuarial science,
performing arts, consulting, athletics,
financial services, brokerage services,
investing and investment management,
trading or dealing in securities, trust or
estate interests, or commodities or any
other trade or business where the
principal asset is the reputation or skill
of one or more of its employees or
owners. The term any trade or business
where the principal asset is the
reputation or skill of one or more of its
employees or owners means any trade
or business that consists of any of the
following: (i) a trade or business in
which a person receives fees,
compensation, or other income for
endorsing products or services; (ii) a
trade or business in which a person
licenses or receives fees,
compensation, or other income for the
use of an individual’s image, likeness,
name, signature, voice, trademark, or
any other symbols associated with the
individual’s identity; or (iii) receiving
fees, compensation, or other income for
appearing at an event or on radio,
television, or another media format.
Exception. If the beneficiary’s
taxable income is equal to or less than
the threshold for the reporting 2021 tax
year, $164,900 ($329,800 if married
filing jointly or $164,925 if married filing
separately), the QBI from the SSTB may
be used by the beneficiary to compute
their QBI deduction. If the beneficiary’s
taxable income is within the phase-in
range, the threshold amount plus
$50,000 ($100,000 if married filing
jointly), an applicable percentage of the
QBI, W-2 wages, and UBIA of qualified
property from an SSTB may be used by
the beneficiary to compute their QBI
deduction. Therefore, the statement
attached to the Schedule K-1 issued to
each beneficiary must identify any items
relating to SSTBs.
Aggregation. A trust or estate
engaged in more than one trade or
Instructions for Form 1041 (2021)

business may choose to aggregate
multiple trades or businesses into a
single trade or business for purposes of
section 199A if it meets the following
requirements.
1. The same person, or group of
persons, either directly or through
attribution, owns 50% or more of each
trade or business for a majority of the
tax year, including the last day of the tax
year, and all trades or businesses use
the same tax year-end;
2. None of the trades or businesses
are an SSTB; and
3. The trades or businesses to be
aggregated meet at least two of the
following three factors:
a. They provide products, property,
or services that are the same or that are
customarily offered together;
b. They share facilities or share
significant centralized business
elements, such as personnel,
accounting, legal, manufacturing,
purchasing, human resources, or
information technology resources; or
c. They are operated in coordination
with, or reliance upon, one or more of
the businesses in the aggregated group.
If the trust or estate chooses to
aggregate multiple trades or
businesses, it must report the
aggregation on Statement B, or a
substantially similar statement, and
attach it to each Schedule K-1. The
statement must provide the information
necessary to identify each separate
trade or business included in each
aggregation, a description of the
aggregated trades or businesses, and
an explanation of the factors met that
allow the aggregation in accordance
with Regulations section 1.199A-4. The
aggregation statement must be
completed each year to show the trust
or estate's trade or business

Instructions for Form 1041 (2021)

aggregations. Failure to disclose the
aggregations may cause them to be
disaggregated.
The trust or estate's aggregations must
be reported consistently for all
subsequent years, unless there is a
change in facts and circumstances that
changes or disqualifies the aggregation.
The trust or estate must provide a
written explanation for any changes to
prior year aggregations that describes
the change in facts and circumstances.
If the trust or estate directly or indirectly
owns an interest in a relevant RPE that
aggregates multiple trades or
businesses, it must attach a copy of the
RPE’s aggregation to each
Schedule K-1. The trust or estate
cannot break apart the aggregation of
another RPE, but it may add trades or
businesses to the aggregation,
assuming the requirements above are
satisfied.
Determining the trust or estate’s
QBI or qualified PTP items. The trust
or estate’s items of QBI that must be
reported to beneficiaries include the
allocated amounts of qualified items of
income, gain, deduction, and loss from
the trust or estate’s trades or
businesses that are effectively
connected with the conduct of a trade or
business within the United States. This
may include, but is not limited to, items
such as ordinary business income or
(losses), section 1231 gains or (losses),
section 179 deductions, and interest
from debt financed distributions.
QBI may also include rental income
(losses) or royalty income, if the activity
rises to the level of a trade or business;
and gambling gains or (losses), but only
if the trust or estate is engaged in the
trade or business of gambling. Whether
an activity rises to the level of a trade or
business must be determined at the

-45-

entity level and, once made, is binding
on beneficiaries.
Qualified PTP items that must be
reported to the beneficiaries include the
allocated amounts of the trust or
estate’s share of qualified items of
income, gain, deduction, and loss from
a PTP and may also include gain or loss
recognized on the disposition of the
trust or estate’s partnership interest that
is not treated as a capital gain or loss.
However, QBI and qualified PTP items
don’t include any of the following.
• Items that are treated as capital gain
or loss under any provision of the Code.
• Dividends or dividend equivalents,
including qualified REIT dividends.
• Interest income (unless received in
connection with the trade or business).
• Wage income.
• Income that is not effectively
connected with the conduct of a trade or
business within the United States (for
more information, go to IRS.gov and
type in the key word “effectively
connected income”).
• Commodities transactions, or foreign
currency gains or losses described in
section 954(c)(1)(C) or (D).
• Income, loss, or deductions from
notional principal contracts under
section 954(c)(1)(F).
• Annuities (unless received in
connection with the trade or business).
• Guaranteed payments described in
section 707(c) received by the entity for
services rendered to a partnership.
• Payments described in section
707(a) received by the entity for
services rendered to a partnership.
QBI flowchart. Trusts or estates
may use the QBI flowchart, later, to help
them determine if an allocated item of
income, gain, deduction, or loss is
includible in QBI reportable to
beneficiaries.

QBI Flowchart
Questions

Yes

No

Is the item effectively connected with the conduct of a trade or business within the United
States?

Continue

Stop, this item isn’t QBI.

Is the item attributable to a trade or business (this may include section 1231 gain (loss),
section 179 deductions, interest from debt financed distributions, etc.)? Examples of an item
not considered attributable to the trade or business at the entity level include gambling
income (loss) where the entity isn’t engaged in trade or business of gambling, income (loss)
from vacation properties when the entity isn’t in that trade or business, activities not engaged
in for profit, etc.

Continue

Stop, this item isn’t QBI.

Is the item treated as a capital gain or loss under any provision of the Internal Revenue Code
or is it a dividend or dividend equivalent?

Stop, this item isn’t QBI.

Continue

Is the item interest income other than interest income properly allocable to a trade or
business? (Note that interest income attributable to an investment of working capital,
reserves, or similar accounts isn’t properly allocable to a trade or business).

Stop, this item isn’t QBI.

Continue

Is the item an annuity, other than an annuity received in connection with the trade or business? Stop, this item isn’t QBI.

Continue

Is the item gain or loss from a commodities transaction or foreign currency gain or loss
described in sections 954(c)(1)(C) or (D)?

Stop, this item isn’t QBI.

Continue

Is the item gain or loss from a notional principal contract under section 954(c)(1)(F)?

Stop, this item isn’t QBI.

Continue

Is the item of income or loss from a qualified publicly traded partnership?

This item is a qualified PTP
item. Report this item as
qualified PTP income or
loss, subject to
beneficiary-specific
determinations, and
check the PTP box.

This item is QBI. Report this
item as QBI subject to
beneficiary-specific
determinations.

Specific Instructions for Statement
A—QBI Pass-through Entity Reporting.
QBI or qualified PTP items. The
trust or estate must first determine if it is
engaged in one or more trades or
businesses. It must then determine if
any of its trades or businesses are
SSTBs. The trust or estate must also
determine whether it has qualified PTP
items from an interest in a PTP. The
trust or estate must indicate the status
on the appropriate check boxes for each
trade or business (or aggregated trade
or business) or PTP interest reported.
Note. SSTBs and PTPs cannot be
aggregated with any other trade or
business. So, if the aggregation box is
checked, the SSTB and PTP boxes for
that specific aggregated trade or
business should not be checked.
Next, the trust or estate must report to
each beneficiary their allocable share of
all apportioned items that are QBI or
qualified PTP items for each trade or
business the trust or estate owns
directly or indirectly. Use the QBI Flow
Chart above to determine if an allocated
item is reportable as a QBI item or
qualified PTP item subject to
beneficiary-specific determinations.
Each item included under “Other” must
be stated separately, identifying the
nature and amount of each item.

W-2 wages and UBIA of qualified
property. The trust or estate must
determine the W-2 wages and UBIA of
qualified property properly allocable to
QBI for each qualified trade or business
and report the allocable share to each
beneficiary on Statement A, or a
substantially similar statement, attached
to Schedule K-1. This includes the
allocable share of W-2 wages and UBIA
of qualified property reported to the trust
or estate from any qualified trades or
businesses of an RPE the trust or estate
owns directly or indirectly. However,
trusts or estates that own a direct or
indirect interest in a PTP may not
include any amounts for W-2 wages or
UBIA of qualified property from the PTP,
as the W-2 wages and UBIA of qualified
property from a PTP are not allowed in
computing the W-2 wage and UBIA
limitations.
The W-2 wages are amounts paid to
employees described in section 6051(a)
(3) and (8). If the trust or estate
conducts more than one trade or
business, it must allocate the W-2
wages among its trades or businesses.
See Rev. Proc. 2019-11, 2019-09 I.R.B.
742 for more information.
The unadjusted basis of qualified
property is figured by adding the
unadjusted basis of all qualified assets
immediately after acquisition. Qualified
property includes all tangible property
-46-

subject to depreciation under section
167 for which the depreciable period
hasn't ended that is held and used for
the production of QBI by the trade or
business during the tax year and held
on the last day of the tax year. The
depreciable period ends on the later of
10 years after the property is placed in
service or the last day of the full year for
the applicable recovery period under
section 168.
Section 199A dividends. The trust
or estate must report the apportioned
allocable share of any REIT dividends to
each beneficiary on Statement A, or a
substantially similar statement, attached
to Schedule K-1. Section 199A
dividends do not have to be reported by
trade or business and can be reported
as a single amount to beneficiaries.
Section 199A dividends include
dividends the trust or estate receives
from a REIT held for more than 45 days,
for which the payment is not obligated to
someone else, is not a capital gain
dividend under section 857(b)(3) and is
not a qualified dividend under section
1(h)(11), plus any apportioned qualified
REIT dividends received from a
regulated investment company (RIC).
Fiscal year trusts and estates. For
purposes of determining the QBI or
qualified PTP items, UBIA of qualified
property, and the aggregate amount of
qualified section 199A dividends, fiscal

Instructions for Form 1041 (2021)

year trusts or estates include all items
from the fiscal tax year.
For purposes of determining W-2
wages, fiscal year trusts or estates
include apportioned amounts paid to
employees under section 6051(a)(3)
and (8) for the calendar year ended with

or within the trust or estate’s tax year. If
the trust or estate conducts more than
one trade or business, it must allocate
W-2 wages among its trades or
businesses. See Rev. Proc. 2019-11 for
more information.

items of income, gain, deduction and
loss from a PTP, but the W-2 wages and
UBIA of qualified property from the PTP
should not be reported as the
beneficiary cannot use that information
in computing their QBI deduction.

Note. The trust or estate must report
each beneficiary’s share of qualified

Statement A—QBI Pass-through Entity Reporting
Pass-through entity’s name:

Pass-through entity’s EIN:

Beneficiary’s name:

Benificiary’s identifying number:
PTP
Aggregated
SSTB

Beneficiary's Share of:
QBI or Qualified PTP Items Subject to Beneficiary-specific Determinations

TB1

PTP
Aggregated
SSTB
TB2

PTP
Aggregated
SSTB
TB3

Ordinary business income
Rental income
Other

W-2 Wages
UBIA of Qualified Property
Section 199A Dividends

Specific Instructions for Statement
B—QBI Pass-through Entity Aggregation Election(s). If the trust or
estate elects to aggregate more than
one trade or business that meet all the
requirements to aggregate, the trust or
estate must report the aggregation to
beneficiaries on Statement B, or a
substantially similar statement, and
attach it to each Schedule K-1. The trust
or estate must indicate trades or
businesses that were aggregated by
checking the appropriate box for each
aggregated trade or business. The trust
or estate must also provide a
description of the aggregated trade or

Instructions for Form 1041 (2021)

business and an explanation of the
factors met that allow the aggregation.

year aggregations that describes the
change in facts and circumstances.

The aggregation statement must be
completed each year to show the trust’s
or estate’s trade or business
aggregations. Failure to disclose the
aggregations may cause them to be
disaggregated. The trust’s or estate’s
aggregations must be reported
consistently for all subsequent years,
unless there is a change in facts and
circumstances that changes or
disqualifies the aggregation. The trust or
estate must provide a written
explanation for any changes to prior

If the trust or estate holds a direct or
indirect interest in an RPE that
aggregates multiple trades or
businesses, the trust or estate must also
include a copy of the RPE’s
aggregations with each beneficiary’s
Schedule K-1. The trust or estate
cannot break apart the aggregation of
another RPE, but it may add trades or
businesses to the aggregation,
assuming the aggregation requirements
are satisfied.

-47-

Statement B—QBI Pass-through Entity Aggregation Election(s)
Pass-through entity’s name:

Pass-through entity’s EIN:

Aggregation of Pass-through Business Operations
Aggregation 1
Provide a description of the aggregated trades or businesses and an explanation of the factors met that allow the aggregation in accordance with
Regulations section 1.199A-4. In addition, if the pass-through entity holds a direct or indirect interest in a relevant pass-through entity (RPE) that
aggregates multiple trades or businesses, attach a copy of the RPE's aggregations.

Has this trade or business aggregation changed from the prior year? This includes changes in the aggregation due to a trade or business being
formed, acquired, disposed, or ceasing operations. If yes, explain.

Note. If you have more than one aggregated group, attach additional Statements B. Name the additional aggregations 2, 3, 4, and so forth.

Specific Instructions for Statement
C—QBI Pass-through Entity Reporting - Patrons of Specified Agricultural and Horticultural Cooperatives.
QBI items and wages allocable to
qualified payments. If the trust or
estate is a patron of a specified
agricultural or horticultural cooperative,
the trust or estate must provide the
allocable share of QBI items and W-2
wages allocable to qualified payments

from each trade or business to each of
its beneficiaries on Statement C, or a
substantially similar statement, and
attach it to Schedules K-1 so each
beneficiary can compute their patron
reduction under section 199A(b)(7).

reported to the trust or estate on Form
1099-PATR from the cooperative.

QBI items and W-2 wages allocable to
qualified payments include apportioned
QBI items included on Statement A that
are allocable to the qualified payments

Section 199A(g) deduction. The
trust or estate must report to its
beneficiaries their allocable share of any
apportioned section 199A(g) deduction
passed through the cooperative, as
reported on Form 1099-PATR. Section
199A(g) deductions do not have to be
reported by trade or business and can
be reported as a single amount to
beneficiaries.

Statement C—QBI Pass-through Entity Reporting - Patrons of Specified Agricultural and Horticultural
Cooperatives
Pass-through entity’s name:

Pass-through entity’s EIN:

Beneficiary’s name:

Beneficiary's identifying number:
PTP
Aggregated
SSTB

Beneficiary’s Share of:
QBI Items Allocable to Qualified Payments Subject to Beneficiary-Specific
Determinations

TB1

PTP
Aggregated
SSTB
TB2

PTP
Aggregated
SSTB
TB3

Ordinary business income
Rental income
Other

W-2 Wages Allocable to Qualified Payments
Section 199A(g) Deduction

-48-

Instructions for Form 1041 (2021)

Other information (code Z). List on a
separate sheet the tax information the
beneficiary will need to complete his or
her return that isn't entered elsewhere
on Schedule K-1.
For example, if the estate or trust
participates in a transaction that must
be disclosed on Form 8886 (see
earlier), both the estate or trust and its
beneficiaries may be required to file
Form 8886. The estate or trust must
determine if any of its beneficiaries are
required to disclose the transaction and
provide those beneficiaries with
information they will need to file Form
8886. This determination is based on
the category(ies) under which a
transaction qualified for disclosure. See
the Instructions for Form 8886 for
details.
In addition, if the beneficiary is a
“covered person” in connection with a
foreign tax credit splitter arrangement
under section 909, attach a statement

Instructions for Form 1041 (2021)

that identifies the arrangement including
the foreign taxes paid or accrued.

information. See the Instructions for
Form 8993 for details.

Inclusion of global intangible
low-taxed income (GILTI). Section
951A requires U.S. shareholders of
controlled foreign corporations to report
their ratable share of GILTI in taxable
income. If applicable, provide the
information necessary to figure the
GILTI inclusion to each beneficiary. See
the Instructions for Form 8992 for
details.

Limitation on business interest expense. If an estate or trust is required
to file Form 8990, the adjusted taxable
income of an estate or trust beneficiary
is reduced by any income (including any
distributable net income) received from
the estate or trust by the beneficiary to
the extent such income supported a
deduction for business interest expense
under section 163(j)(1)(B) in computing
the estate's or trust's taxable income. If
applicable, provide the beneficiary the
necessary information to calculate this
amount in an attachment to
Schedule K-1. See Form 8990 and the
Instructions for Form 8990 for additional
information.

Foreign-derived intangible
income (FDII). Public Law 115-97
enacted section 250, which allows a
domestic corporation a deduction for
the eligible percentage of FDII and
GILTI. Section 250 is effective for tax
years beginning after 2017. If
applicable, provide the necessary
information to each domestic corporate
beneficiary for its calculation of FDII
benefit. See section 250 for more

-49-

Tax-exempt income related to PPP
Loans. Enter the beneficiary's share of
tax-exempt income related to PPP loan
forgiveness.

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the
United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to
allow us to figure and collect the right amount of tax.
You aren't required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the
form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as
their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return
information are confidential, as required by Code section 6103.
The time needed to complete and file this form and related schedules will vary depending on individual circumstances. The
estimated average times are:
Form 1041
Recordkeeping
Learning about the law
or the form
Preparing the form
Copying, assembling, and
sending the form to the IRS

Schedule I

Schedule J

25 hr., 35 min.

Schedule D
14 hr., 35 min.

17 hr., 42 min.

11 hr., 00 min.

Schedule K-1
6 hr., 27 min.

Form 1041-V
43 min.

15 hr., 52 min.
30 hr., 1 min.

3 hr., 38 min.
4 hr., 58 min.

4 hr., 22 min.
4 hr., 51 min.

1 hr., 27 min.
2 hr., 37 min.

35 min.
43 min.

-------

3 hr., 45 min.

16 min.

----

16 min.

----

----

If you have comments concerning the accuracy of these time estimates or suggestions for making this form and related
schedules simpler, we would be happy to hear from you. You can send us your comments from IRS.gov/FormComments. Or
you can send comments to Internal Revenue Service, Tax Forms and Publications Division,1111 Constitution Ave. NW,
IR-6526, Washington, DC 20224. Don't send Form 1041 to this address. Instead, see Where To File, earlier.

-50-

Instructions for Form 1041 (2021)

Index
A
Accounting income 3
Alaska Native Settlement Trusts 7
Amended return 19
Amounts paid or permanently set
aside 28
Assembly 12
Attachments 13
B
Bankruptcy estate 7, 15, 18
Bankruptcy information 15
Beneficiary 4
Allocation of estimated tax
payment 10
Complex trust 40
Estate 40
Simple trust 40
Tax year for inclusion 40
Withholding on foreign
person 29
Blind trust 20
C
Cemetery perpetual care fund 26
Charitable deduction 28
Charitable remainder trusts 19
Common trust fund 7
D
Decedent's Estate 4
Definitions:
Accumulation distribution 37
Adjusted gross income (AGI) 3
Beneficiary 4
Complex trust 18
Decedent's Estate 4
Decedent's estate 17
DNI 4
Fiduciary 4
Grantor trusts 18
IRD 4
Outside income 38
Pooled income fund 18
Revocable Living Trust 4
Simple trust 17
Trust 4
Trusts 4
Distributable net income (See DNI)
DNI 4, 29
E
Electing small business trusts 15
ESBT (S portion only) 18

S portion 15
Elections:
Section 643(e)(3) 30
Section 643(g) 10
Section 645 5
Special rule for qualified
revocable trusts 5
Treating contributions as paid
in prior tax year 28
Electronic deposits 10
ESBTs (See Electing small
business trusts)
Estate 4, 40
Bankruptcy 7, 18
Exemption for 27
Foreign 4
Who must file 4
Estate tax deduction 26
Estimated tax 9, 28
Allocation of payments to
beneficiaries 9
Penalty 27
Exemption 27
Extraterritorial income
exclusion 20
F
Fiduciary 4, 5, 8
Fiduciary accounting income
(FAI) (See Accounting income)
Final return 19
First tier distributions 30
Foreign tax credit 31
Form 1041-T 10
Form 8855 5
G
General business credit 31
Grantor trusts 3, 5, 13, 18
Backup withholding 14
Nonqualified deferred
compensation plans 18
Optional filing methods 13
Pre-need funeral trusts 18
Special filing instructions 13
GST tax deduction 26
I
Income distribution deduction 3,
26, 29
Interest income 20
Inter vivos 3, 4
IRD:
Deduction 26

M
Minimum taxable income 27
N
Net investment income tax 34
Net operating loss 27
Nonexempt charitable
deduction 19
Nonexempt charitable trust 18, 28
Nonqualified deferred
compensation plans 18
P
Paid preparer 8
Paid preparer authorization 8
Penalties:
Estimated tax 27
Failure to provide a required
TIN 39
Failure to provide information
timely 10
Late filing of return 10
Late payment of tax 10
Other 11
Trust fund recovery 10
Underpaid estimated tax 10
Pooled income funds 14, 18, 28,
29
Pre-need funeral trusts 18
Q
Qualified business income
deduction 26
Qualified disability trust 27
Qualified revocable trust 5
Qualified settlement funds 7
Qualified small business stock 29
Qualified subchapter S trust
(QSST) 5, 13, 18
R
Returns:
Amended 19
Common trust fund 7
Electronic and magnetic
media 8
Final 19
Nonexempt charitable
trust 18, 19
Qualified settlement funds 7
Split-interest trust 19
When to file 8
Who must file 4

-51-

Revocable Living Trusts:
Section 645 Election 19
S
Second tier distributions 30
Separate share rule 29
Special filing instructions:
Bankruptcy estates 17
Electing small business
trusts 15
Grantor trusts 13
Pooled income funds 14
Split-interest trust 19
Substitute forms 39
T
Taxable income 27
Tax rate schedule 30
Throwback years 38
Trusts 4
Alaska Native Settlement 7
Blind 20
Common trust fund 7
Complex 40
Domestic 5
Exemption for 27
Foreign 36
Grantor 3
Inter vivos 3, 4
Nonexempt charitable 18, 19,
28
Pre-need funeral 18
Qualified disability 27
Qualified revocable 5
Simple 40
Split-interest 19
Testamentary 3, 4
Who must file 5, 39
W
Where to file 9
Who must file:
Decedent's estate 4
Trust 5
Withholding on foreign person 29